The Cheltenham Town chief has been a leading candidate for the Oakwell post for several weeks and has met with Reds officials twice, including last Monday where he is said to have had a positive meeting with chief executive officer Khaled El-Ahmad.
Duff, 44, also spoke to Blackpool about the vacant position there on Tuesday after the Championship club received permission from Cheltenham.
But Barnsley are now set to appoint the 44-year-old, with his former Cheltenham team-mate Martin Devaney, under-23s manager at Oakwell and caretaker boss at the end of last term, expected to be part of his backroom team.
A Cheltenham statement read: "After four years as manager of Cheltenham Town Michael Duff has today informed the Board of Directors that he wishes to depart the club to pursue a new opportunity.
"Since the end of the season the club has received two approaches from other clubs for permission to speak to Michael and one of them has now offered him the position of manager.
“Obviously it’s a disappointing day for Cheltenham Town as Michael has done such a tremendous job for us but he leaves with our very best wishes for the future,” said club chairman David Bloxham.
“Michael made it clear to us that it was a very difficult decision for him. We did all we could to try and keep him at the club but ultimately this new opportunity is one that he feels it right for him at this stage of his career.
“I know it would not have been an easy decision to arrive at because Michael has built up a very special bond with our club and his family all live locally so it will be a big wrench for him to leave but as an ambitious young manager, we completely respect his decision.
“The search for a new manager will begin immediately and we are fortunate in having a strong and very capable football staff who will continue preparations for the new season as normal. Our Director of Football Micky Moore continues to work hard to recruiting new players and the squad will return for pre-season training next week.”
Barnsley had made contact with a host of other potential candidates since starting the process early last month to find a permanent replacement for Poya Asbaghi.
Former Reds head coach Daniel Stendel is understood to be among several individuals spoken to during the process alongside ex-Carlisle United manager Chris Beech.
Some have since moved into positions at other clubs.
Jimmy Floyd Hasselbaink pulled out of the race last Wednesday. Reports have suggested that there was a mix-up in communication ahead of a scheduled remote meeting on Monday between the Dutchman and Barnsley representatives
Manchester United set-piece coach Eric Ramsay was another contender at one stage.
Neil Warnock has also been contacted about the position. The 73-year-old retired from management in April and is unlikely to be convinced to return.
Another senior name in the shape of legendary former Barnsley defender Mick McCarthy has held talks with Barnsley. But he subsequently turned down the opportunity.