The 'Wolverhampton to Walsall corridor' is expected to be included in an announcement in Friday's mini budget.
It could mean lower personal taxes for people living or working in the area. Tax breaks will be offered for businesses and planning regulations relaxed to encourage more commercial development and house building.
Ministers are believed to have identified the Black Country as a suitable site for a West Midlands zone, with Wolverhampton already hosting the regional headquarters for the Department for Levelling Up, Housing and Communities.
It is unclear what the corridor between the city and Walsall will include, but it appears other areas of the Black Country are likely to miss out.
Chancellor Kwasi Kwarteng is set to announce the creation of the zones in Friday’s emergency budget, which is also expected to include the abandonment of planned rises in national insurance and corporation tax.
Investment zones were a key pledge during Liz Truss's Tory leadership campaign. She said they would cut the 'red tape' that has dogged the freeports brought in by her predecessor Boris Johnson.
The PM described them as "full-fat freeports" that would get Britain's economy moving by boosting growth.
She said the chosen areas would benefit from a low-tax burden and reduced planning restrictions, while other regulations would be tailored on a case-by-case basis.
The Wolverhampton to Walsall corridor is expected to feature in the announcement, along with areas including on the Thames estuary, the Tees Valley, West Yorkshire and Norfolk.
Speaking in July, Ms Truss said investment zones would be an example of how she will be “laser-focused on turbocharging business investment and delivering the economic growth our country desperately needs”.
She added: “We can’t carry on allowing Whitehall to pick the winners and losers; like we’ve seen with the current freeport model."
Freeports, which allow sites – including one in the East Midlands – to benefit from tariff exemptions on imports, became one of Mr Johnson's flagship policies.