An official announcement is expected to be made later on Friday confirming the bout for the IBF, WBA and WBO titles.
Joshua lost the belts in a shock defeat to Ruiz Jr on June 1 at Madison Square Garden.
The New York venue was in the running to host the rematch, as was Cardiff’s Principality Stadium, however The Telegraph reports Riyadh has beat them out.
Saudi Arabian sports authorities are said to be putting up almost $100million (£83million) for the match to be held there. In the UK, the fight will be broadcast on Sky Box Office.
Joshua has been battling for the rematch to be held in the UK, however last week Ruiz claimed he would refuse to fight in the UK following Dillian Whyte’s failed drugs test.
He then admitted he would be fine with fighting again in the United States, however Riyadh is seen to be a more neutral venue.
Recently, Saudi Arabia hosted Callum Smith vs George Groves, and Amir Khan vs Billy Dib.
In June, Ruiz Jr sent Joshua to the canvas twice in the third round, dazing the champion. He seemed to recover in the fourth and fifth, but was struggling with a bloodied nose by the end of the sixth.
In the seventh, Ruiz Jr dropped Joshua twice more, and the referee decided to stop the fight.