The mayor said the move is intended to increase accountability and transparency of government.
Daley tried 20 years ago to give the IG the power to investigate members of the City Council and their staffs but had the proposal shot down by those very same people who were concerned about political witch hunts, the Chicago Sun-Times explained.
Inspector General Joseph Ferguson said the changes could be a "watershed moment in the history of the city."
Daley said the recent guilty plea by Ald. Ike Carothers on corruption charges "broke the camel's back" and may be causing some people to lose confidence in government.
Under Daley's proposal, which he'll make to the council on Wednesday, the IG's office would also take over the duties of hiring oversight, which is currently done by the $4 million-per-year Office of Compliance.
He said three-year-old office hadn't produced the results he'd hoped for.
"I am determined to have a hiring system that works and is accountable so that we're getting the best, most qualified employees and taxpayers are getting their money's worth. As mayor, if something isn't working as well as you want it to, you must make the changes that are needed," he said, according to a statement released from his office.