The Times of Israel reported that Wexler was contacted by staff on Friday and was told he was no longer in the running.
Once announced, Nides would need to be confirmed by the Senate before taking office. He is not expected to face any major opposition.
Meanwhile, senior diplomat Michael Ratney will serve as an interim head of the US embassy in Jerusalem beginning next month.
Wexler told JTA that he had already called Nides to congratulate him on being selected.
As part of the Obama administration, Nides played a key role in the administration’s approval of an extension on loan guarantees worth billions of dollars for Israel.
He also led the push against Congress’s efforts to defund the UN Educational, Scientific and Cultural Organization (UNESCO) and the UN Agency for Relief and Works Agency for Palestine Refugees (UNWRA).
Nides was born in 1961 to Jewish parents in Duluth, Minn., and has extensive experience in government and the private sector. His father, Arnold Nides, was the founder of the finance company Nides Finance, as well as serving as president of the Duluth Jewish Federation and Temple Israel.