The Ligue 1 side announced on Tuesday that a deal has been struck with the Whites for their 23-year-old winger.
Gradel has been linked with a number of clubs this summer, including a number of sides outside of England.
Sochaux were believed to be leading the chase for his signature, but St Etienne appear to have edged ahead of their domestic rivals.
Gradel is due in France on Wednesday for a medical, with both sides of the deal now facing a race against time to push through a transfer before the summer deadline passes.
St Etienne revealed on their official website that they are closing on Gradel, while they are also looking to tie up a move for Steaua Buchares midfielder Banel Nicolita.
A statement released by the club read: "On Tuesday evening, agreements have been reached in principle with Steaua Bucharest and Leeds United for the arrivals of Banel Nicolita and Max Gradel.
"Both players have been in St Etienne's sights for several weeks and will arrive on Wednesday for medical checks and to complete the final details of their contracts."
Leeds have confirmed that they reluctantly accepted a bid after seeing Gradel hand in a transfer request.