Insiders say that Mr Mugabe, aged 88 and now in office for three decades, will stand as Zanu PF's candidate in elections one last time before handing over to Mr Mnangagwa, a former spy chief nicknamed "The Crocodile" for his ruthless reputation.
In the clearest sign yet that he is being groomed for the top job, Mr Mnangagwa, 65, was recently dispatched to Tehran where he met Iranian President Mahmoud Ahmadinejad, a key anti-Western ally.
Having another Zanu-PF strongman succeed Mr Mugabe would help ensure that other powerful party members avoid any future scrutiny about wealth gained through illegal land seizures, and avoid possible prosecution at The Hague.
Mr Mnangagwa, the former head of Zimbabwe's Central Intelligence Organisation, was appointed campaign manager by Mr Mugabe during the 2008 presidential election and was widely blamed for the brutality unleashed after his rival, Morgan Tsvangirai, edged ahead in the first round of voting.
The prospect of taking over from the ageing leader gives him a clear incentive to ensure that elections tipped for later this year go Zanu-PF's way again. Last month, Mr Tsvangirai's party, the Movement for Democratic Change, claimed that the army was already recruiting and training jobless Zanu PF youths "on a massive scale" for a new programme of vote-fixing.