Labour has criticised the move. It's MP Phil Twyford said it did not make sense.
"There are really good reasons why eight years ago NZAID was set up as a semi-autonomous body," he told Radio New Zealand.
"It was to protect it from the meddling of foreign affairs bureaucrats wanting to use the aid programme as a slush fund for political and diplomatic agendas. That is exactly what Murray McCully wants to do."
World Bank Pacific Director Nigel Roberts in Wellington for meetings with NZAID said he hoped the bank would maintain its good relationship with the aid agency.
"I think from our point of view we have a very close relationship with NZAID, They are very supportive of the work we do in the Pacific, both as a co-financiers and as a peer... a critical voice of a friendly type that we can rely on."
Mr McCully is expected to change the agency's mandate to focus on economic development rather than poverty alleviation.
He previously said the $480 million aid programme budget would not be reduced but payments had become "a handout rather than a hand up" and NZAID'S mandate for poverty elimination was too broad.
"You could ride around in a helicopter pushing hundred dollar notes out the door and call that poverty elimination," he said.
NZAID was separated from the ministry by the previous government in 2002.
Mr Roberts said aid agencies priorities shifted over time.
"We'd be less interested in the particular form or political relationships than in, first of all, our relationship and the ability to communicate openly and freely with NZAID -- which I am sure will remain -- as well as their effectiveness as an aid agency."
Mr McCully will announce the changes in a speech to the New Zealand Institute of International Affairs at Wellington's Victoria University.
Foreign Affairs was also said to be headed for a shake-up, with reports that non-diplomat John Allen is to be the ministry's new head.
Mr Allen, chief executive of New Zealand Post, was reported to be the replacement for retiring ministry boss Simon Murdoch.
