Congressional Quarterly has the story (sorry, no link yet):

Former House Speaker J. Dennis Hastert, R-Ill., will not seek re-election next year, GOP sources say. A formal announcement is expected Friday.

As I have noted before Illinois 14th congressional district, which Hastert represents, is very winnable for the Democrats, particularly if the seat is open (as this CQ report indicates it will be). In the 2004 presidential election the district leaned roughly five points more Republican than the nation as a whole, a number that could be lower in 2008 given the distinct possibility that a Democrat with ties to Illinois (either Barack Obama, who represents the state, or Hillary Clinton, who was born and raised there) will top the ticket.

Anyway, we'll have more on this story as it continues to develop.

Update [2007-8-14 13:26:48 by Jonathan Singer]: More from CBS 2 in Chicago, under the heading, "CBS 2 Exclusive: Hastert Leaving Congress":

CBS 2 Political Editor Mike Flannery reports exclusively sources say that they expect Hastert to announce he will not seek re-election next year.

Well, that sounds slightly less convincing than the CQ report (who are the "sources"?), but now there are a couple of news organizations running with the story. Again, more here as we get it...

Update [2007-8-14 13:28:13 by Todd Beeton]: The Beacon News reports that Hastert's announcement will be at 10:30am on Friday at the Kendall County Courthouse in Yorkville, IL (although Jonathan seems to have scooped everyone as to what Hastert will actually be announcing.) As for who might be challenging for the seat, here's an update on the current state of the field:

In 2006, unknown John Laesch received 40% of the vote against the sitting Speaker of the House, just 4% below Kerry's share of the 2004 presidential vote in that district. Laesch is running again next year, but unlike in some other districts, the field is hardly being cleared for him. Democratic challengers for the nomination include entrepreneur and physicist Bill Foster and lawyer Jotham Stein. Diarist Downtowner has been keeping us up on the Laesch campaign and Bill Foster has himself posted here.

On the Republican side, Swing State Project had announced late last year that Illinois state legislators Rep. Tim Schmitz and state Sen. Chris Lauzen would likely enter the race if Hastert were not to seek re-election although a recent Bob Novak column points to Hastert's chief of staff Mike Stokke as his would be heir apparent.

Update [2007-8-14 14:31:33 by Jonathan Singer]: More from CQ:

After less than a year as a rank-and-file House member, former Speaker J. Dennis Hastert is expected to call an end to a political career that made him the longest serving Republican Speaker in the history of the House of Representatives.

Several Illinois newspapers, including the Aurora Beacon News and the Chicago Tribune, reported Tuesday that the Illinois Republican has scheduled a Friday announcement on the steps of the Kendall County Courthouse in Yorkville, Ill. While Hastert aides are refusing to discuss what he plans to say, he is expected to announce that he will not run for a 12th term in 2008, according to Republican sources.