Her departure, which was first reported by Bloomberg News, comes amid a broader shake-up at the security council under McMaster's leadership.
The official said that McFarland has accepted the offer of the ambassadorship, though that person emphasized that the appointment is still in the process of being official. McFarland would have to be confirmed by the Senate.
Flynn was ousted in February after it became clear that he misled Vice President Pence about his contacts with Russian officials. McFarland's position on the council has been in question since then.
McFarland initially resisted but later accepted the reassignment, which the administration official characterized as a promotion to a critically important diplomatic post with a key U.S. ally in the Pacific region.
McMaster later named Dina Powell as deputy national security adviser for strategy, a new position that McMaster elevated last week to the security council's “principals committee” and “deputies committee.”
An Army lieutenant general, McMaster has moved to assert his power over the national security decision-making process in Trump's White House. Last week, he led a restructuring of the security council, removing White House chief strategist Stephen K. Bannon from the principals committee and diminishing the power of homeland security adviser Tom Bossert within the committee.