The people spoke to The Associated Press on the condition of anonymity because an official announcement hasn't been made.
Less than two years after replacing Joe Paterno as coach of the Nittany Lions, the 44-year-old O'Brien will return to the NFL. He was an offensive assistant under Bill Belichick at New England from 2007-12.
O'Brien was 15-9 at Penn State, hit hard by NCAA sanctions levied for the Jerry Sandusky child sex abuse scandal that cost the late Paterno his job.
Despite a lack of scholarships, a bowl ban, an overall sense of doom, and many player defections from Paterno's final roster, O'Brien led the Nittany Lions to two winning seasons (8-4, 7-5), restoring some tempered enthusiasm in Happy Valley.
But now the Nittany Lions are back to the drawing board after losing O'Brien in a similar circumstance that he turned down last year. After his first season, O'Brien interviewed with the Jacksonville Jaguars and Cleveland Browns, among others, only to stay in State College.
O'Brien was an assistant at Brown, Georgia Tech, Maryland and Duke, before joining Belichick and quarterback Tom Brady in New England.
O'Brien will become the third coach in Texans history, following Dom Capers, who led the team from its expansion season in 2002, and Gary Kubiak.
Kubiak took over after Capers was fired following Houston's 2-14 season in 2005. Kubiak went 61-64 and led Houston to its first two playoff appearances and two AFC South titles before being fired in early December in his eighth season.
The Texans were expected to contend for the Super Bowl this season, but instead lost nine games by a touchdown or less as part of a 14-game skid to end the season with the NFL's worst record at 2-14. The job is still seen as a plum position because Houston has a roster filled with talent, including 2012 Defensive Player of the Year J.J. Watt and star receiver Andre Johnson.
The Texans need to find a solution at quarterback though after veteran Matt Schaub had a terrible season and was benched after six games. He was replaced by Case Keenum, but the former record-setter at the University of Houston proved he wasn't the answer, either.
Houston has the top overall draft pick and could use it on a one of a trio of talented signal-callers who could be available. Louisville's Teddy Bridgewater, 2012 Heisman Trophy winner Johnny Manziel of Texas A&M, and Fresno State's Derek Carr, younger brother of Houston's first-ever draft pick, David Carr, are the top-rated quarterbacks expected to be in the draft.
Defensive coordinator Wade Phillips served as interim coach for the last three games and reportedly interviewed for the job along with former Chicago Bears coach Lovie Smith. But Houston went with O'Brien instead, going with a first-time NFL head coach for the second time in its short history.
Many Penn State players took to Twitter on Tuesday night to congratulate O'Brien on his new job. Cornerback Stephon Morris tweeted: "Couldn't be happy for coach O'B. Chasing his dream, he deserves it. Pls PSU don't bash him. He's done a lot for us & he deserve our support."