The San Francisco-based bank said repayment of the funds is contingent on a $10.4 billion common stock offering.
The move comes on the same day that Citigroup announced plans to repay the $20 billion it received under the government's Troubled Asset Relief Program, or TARP, while Bank of America returned $45 billion in TARP money last week.
Wells Fargo also said it would raise $1.35 billion by issuing common stock to certain employees instead of cash as part of their 2009 compensation. It also plans to boost equity by selling $1.5 billion worth of assets, pending approval by the Federal Reserve.
The bank expects to have a Tier 1 common equity ratio of 6.2% once the bailout funds are repaid.
Under the TARP program, Wells Fargo said it had paid $1.4 billion in dividends to the U.S. Treasury.
"TARP stabilized our country's financial system when confidence in financial markets around the world was being tested unlike any other period in our history," said John Stumpf, Wells Fargo's president and chief executive, in a statement.
Stumpf was one of 12 bank CEOs present at the White House Monday where president Obama urged them to make more loans to small businesses and modify mortgages to aid struggling homeowners.
In a statement released late Monday, Stumpf said Wells Fargo is committed to serving the financial needs of consumers and businesses as the economy continues its recovery.
"We remain committed to keeping credit flowing, and working closely with financially distressed home owners, as we have throughout this downturn and credit crisis," Stumpf said.
Citigroup Strikes Deal to Repay TARP
Meanwhile earlier in the day, Citigroup said it would raise money to repay the government through a combination of stock and debt, the bulk of which would come from a $17 billion common stock offering.
The New York-based bank also said the government plans to gradually sell the $25 billion worth preferred-stock it owns in Citi over the next 6 to 12 months.
At Citibank, the rush to repay TARP money stems partly from concerns about ongoing government restrictions, including caps on pay packages for executives at the nation's largest bailout firms.
On Friday, White House "pay czar" Kenneth Feinberg capped base salaries for 75 Citigroup executives at $500,000 for the remaining three weeks of 2009.
Those changes were expected to serve as the model for their pay next year as well. But, by paying back the bailout, Citigroup will no longer be required to submit pay packages for its executives to the government for approval.
Wells Fargo was not under the authority of Feineberg's pay restrictions