Australian media reported that Wasim proposed on bended knee to Shaniera Thompson in her living room.
"Yes, I will marry next year and I've known Shaniera for the last one-and-a-half years and she has converted to Islam," Wasim told AFP by telephone from England.
"I feel lucky that I have got a second chance in life."
The 47-year-old's first wife Huma died in 2009.
Wasim said Thompson, a former public relations consultant, will settle in Pakistan.
"She is close to my kids who are also excited and my in-laws (Huma's parents) also endorsed the decision after meeting her," said Wasim, who has two sons from his previous marriage.
"It will be a new life, a new beginning and I hope that we will settle down well with the best wishes of family and fans," he said.
Wasim played 104 Tests and 356 one-day internationals for Pakistan in a career lasting from 1984 to 2003.
He was regarded as one of the best left-arm fast bowlers to have played the game and remains a major celebrity in Pakistan.
Wasim was player of the tournament in the country's only triumph in the World Cup, in Australia in 1992. He captained Pakistan to a runners-up finish in the 1999 World Cup in England.