His decision to remain in the armed forces is understood to reflect the desire of William and his wife Kate to raise their child away from the spotlight of full-time royal duties, a report in the Sunday Times said.
William, the second in line of succession, was commissioned into the Household Cavalry in 2006 after passing out from the Royal Military Academy Sandhurst.
"A plan has been devised for him to return to his old regiment. He would retain his rank as captain and assume the role of adjutant, which would provide the grounding for possible promotion to major and command of a cavalry squadron," the report said.
As adjutant, much of his time would be divided between the Household Cavalry barracks at Windsor and Knightsbridge, in London.
Both the places would be convenient for William when he along with wife Kate move to Kensington Palace in west London with their new-born baby later in 2013.
It was revealed in April that the Prince would be leaving the RAF base on Anglesey where he has served since 2010.