WASHINGTON – President Bush has settled on Michael B. Mukasey, a retired federal judge from New York, to replace Alberto Gonzales as attorney general and will announce his selection Monday, a person familiar with the president’s decision said Sunday evening.

Mukasey, who has handled terrorist cases in the U.S. legal system for more than a decade, would become the nation’s top law enforcement officer if confirmed by the Senate. Mukasey has the support of some key Democrats, and it appeared Bush was trying to avoid a bruising confirmation battle.

The 66-year-old New York native, who is a judicial adviser to GOP presidential hopeful Rudy Giuliani, would take charge of a Justice Department where morale is low following months of investigations into the firings of nine U.S. attorneys and Gonzales’ sworn testimony on the Bush administration’s terrorist surveillance program.

Key lawmakers, Democrats and Republicans alike, had questioned Gonzales’ credibility and competency after he repeatedly testified that he could not recall key events.

The White House refused to comment Sunday. The person familiar with Bush’s decision refused to be identified by name because the nomination had not been officially announced.

Bush supporters say Mukasey, who was chief judge of the high-profile courthouse in Manhattan for six years, has impeccable credentials, is a strong, law-and-order jurist, especially on national security issues, and will restore confidence in the Justice Department.

Bush critics see the Mukasey nomination as evidence of Bush’s weakened political clout as he heads into the final 15 months of his presidency. It’s unclear how Senate Democrats will view Mukasey’s credentials, but early indications are that he will face less opposition than a more hardline, partisan candidate like Ted Olson, who was believed to have been a finalist.

Mukasey has received past endorsements from Democratic Sen. Chuck Schumer, who is from Mukasey’s home state. And in 2005, the liberal Alliance for Justice put Mukasey on a list of four judges who, if chosen for the Supreme Court, would show the president’s commitment to nominating people who could be supported by both Democrats and Republicans.

“While he is certainly conservative, Judge Mukasey seems to be the kind of nominee who would put rule of law first and show independence from the White House, our most important criteria,” Schumer said Sunday. “He’s a lot better than some of the other names mentioned and he has the potential to become a consensus nominee.”

Last week, some Senate Democrats threatened to block the confirmation of Olson, who represented Bush before the Supreme Court in the contested 2000 election. Democratic senators have theorized that Bush might nominate Mukasey, in part, because he wanted to avoid a bruising confirmation battle.

The possibility that Bush would pick Mukasey, however, angered some supporters on the GOP’s right flank, who have given Mukasey less-than-enthusiastic reviews. Some legal conservatives and Republican activists have expressed reservations about Mukasey’s legal record and past endorsements from liberals, and were drafting a strategy to oppose his confirmation even before it became known that Bush had chosen him.

Mukasey was nominated to the federal bench in 1987 by President Reagan. He was chief judge of the U.S. District Court for the Southern District of New York before he rejoined the New York law firm of Patterson Belknap Webb & Tyler as a partner in September 2006.

The Mukasey nomination could be Bush’s last major Cabinet appointment