"The Hitler house will be torn down. The foundations can remain but a new building will be erected. It will be be used by either a charity or the local authorities," Wolfgang Sobotka told Austrian newspaper Die Presse.
He said the decision was based on the recommendations of an expert committee tasked with deciding what to do with the controversial building in the quaint northern town of Braunau am Inn.
The huge yellow house has been empty since 2011 when the government became embroiled in a dispute with owner and local resident Gerlinde Pommer.
For more than a century, her family has owned the large corner house where Hitler was born on April 20, 1889.
In the early 1970s, the Austrian government signed a lease with Pommer and turned the premises into a centre for people with disabilities.
But the arrangement came to an abrupt end five years ago when Pommer unexpectedly refused to grant permission for much-needed renovation works.
She also rejected a purchase offer made by the increasingly exasperated interior ministry.
In July, the government approved legislation to seize the house from Pommer.
An interior ministry spokesman told AFP on Monday that the law amendment was still "under way" -- meaning that parliament has yet to approve the demolition.
"But there is now a clear perspective regarding the future of the building under the ownership of the Austrian republic," Karl-Heinz Grundboeck said.
The issue has sparked heated debate among Braunau's 17,000 residents. Some wanted it to become a refugee centre, others a museum dedicated to Austria's liberation from Nazi rule.
A number of cultural organisations previously opposed the building's demolition because it is part of the historic city centre and therefore under heritage protection.