The 29-year-old royal plans to spearhead an ambitious attempt to bring the injured servicemen's "Olympics", known as the Warrior Games, to London.
It is understood that Harry's surprise move has the blessing of the Queen and his grandfather the Duke of Edinburgh, a former Royal navy officer.
The Evening Standard exclusive also reveals that Prince Harry will run the bid from his own offices which will be located in Buckingham Palace, and that he wants to host the Paralympic-style games at the Olympic Stadium.
Harry, who in November completed the most recent of his Antarctic treks to the South Pole with the Walking with the Wounded charity which works for injured servicemen and women, hopes to expand Olympic-style competition for wounded servicemen and women from the UK, the Commonwealth and America.
A Kensington Palace spokesman said: "Prince Harry has completed his attachment to 3 Regiment Army Air Corps and will now take up a Staff Officer role in HQ London District.
"The Prince will take the position of SO3 (Defence Engagement). His responsibilities will include helping to co-ordinate significant projects and commemorative events involving the Army in London. Prince Harry will retain the rank of Captain and be based from Horse Guards, in Central London."
A senior source told The Evening Standard: "Prince Harry is passionate about this project. He believes it will be an amazing event that will bring the focus of attention on the problems facing those injured on the frontline and will serve to inspire servicemen and women and the wider public.
"The Prince believes the spectacle of ex-military athletes competing against each other would attract huge crowds too. It is his vision. He hopes too it will be televised to reach a maximum audience."
Prince Harry and girlfriend Cressida Bonas, who were spotted earlier this week on a low-key date in Kensington, are said to be on track, but rumours of a wedding this year are "wide of the mark", according to a source close to the couple.
They told The London Evening Standard: "It is fair to say he will have a lot on his plate. This will be his focus going forward.
"But of course he and Cressida are still friends, they get on really well. Although talk of a possible wedding this year is wide of the mark they are happy with the relationship as it is at the moment."