Greenspan is often spoken of as the second-most-powerful man in Washington because of the impact his words and the Federal Reserve's actions can have on interest rates and the economy in general.
The surgery was scheduled for Tuesday at a local hospital that Federal Reserve officials declined to identify.
"Chairman Greenspan on Tuesday will spend a short time in a local hospital to be treated surgically" for an enlarged prostate, the Fed said in a three-sentence statement. "He plans to be back in his office later this week."
The statement and Fed officials offered few details.
The enlarged prostate was detected during a regular examination, and follow-up tests conducted last week showed no cancer, Fed officials said.
Fed spokeswoman Michelle Smith said Greenspan would be treated as an inpatient and would not be under general anesthesia. She also said Greenspan underwent similar surgery in June 1994.
The Fed announced Greenspan's impending surgery on Monday after Wall Street markets closed for the day.
Greenspan, who turned 77 in March, has been serving as Fed chairman since August 1987. His current term as chairman runs to June 20, 2004.
The prostate is a walnut-sized gland that can enlarge as a man ages, making it difficult to urinate. More than half of all men over 60 have the condition, called benign prostatic hyperplasia, or BPH - and 80 percent of men get it by age 80.
Surgery to trim the prostate is the most common and effective treatment. It usually requires up to three days in the hospital.
An enlarged prostate isn't cancerous, but it's often detected with a test that can spot cancer, too. When a man's blood levels of a substance called PSA, or prostate specific antigen, are high, doctors check for both conditions. Also, urinary symptoms can be similar for both diseases.
Greenspan, who was in the office on Monday, is generally considered to be in good health.
The Federal Reserve's next meeting to discuss interest rate policy is on May 6. Smith said Greenspan is expected to attend that meeting.
By Jeannine Aversa