"It's really unique that someone who has been ruling this country for so long has accepted defeat," Alieu Momar Njie told reporters ahead of the results of Thursday's presidential election.
Jammeh, who once said he would govern for a billion years if God willed it, was attempting to win a fifth term with his Alliance for Patriotic Reorientation and Construction (APRC).
Gambian state television told AFP that Jammeh would make a statement later in the day to congratulate opposition leader Adama Barrow, 51.
Barrow, a previously unknown businessman, was chosen as the opposition flag-bearer by a group of political parties who have joined forces for the first time and won unprecedented popular support.
If the concession is confirmed, Barrow will likely decide to serve a three-year term at the head of a transition reform government in the tiny former British colony with pristine beaches that occupies a narrow sliver of land surrounded by French-speaking Senegal.
Jammeh campaign manager Yankuba Colley said he was not aware of the electoral commission chairman's statement but said he believed the president would step down if the Gambian people wanted it.
"When the Gambians make their verdict, he is someone who is faithful," he told AFP.
"It is a difficult result but the man I know will accept whatever comes."
Barrow's camp confirmed the Independent Electoral Commission statement.
Thursday's election was marked by an internet blackout that sparked condemnation from rights groups and the United States.
But early results on Friday were positive for Barrow as he took the capital Banjul — a traditional Jammeh stronghold.
Barrow won nearly 50 percent of the vote in Banjul's three constituencies, according to the IEC, compared to 43 percent for Jammeh.
Security forces had deployed heavily in Banjul earlier Friday amid nervousness over whether Jammeh would accept a ballot box defeat.
Before dawn broke, military and police, some covering their faces, set up checkpoints every few hundred metres on the outskirts of the capital, while citizens were inside sleeping or watching the results come in.
"Power belongs to the people. You cannot stop us and you cannot stop them," Barrow said at his final rally this week.
Jammeh meanwhile had predicted the biggest landslide of his political career.
The United States said turnout appeared to be high and that the vote took place in "generally peaceful conditions", while the IEC hailed "a very successful election."
The US State Department and Human Rights Watch voiced concern however over the blanket cut to internet and international phone calls, as well as claims of voter intimidation.
"The government's communications cutoff and threatened protest ban are only likely to increase tensions between the government and opposition groups," said Babatunde Olugboji from Human Rights Watch.
At his final campaign rally, Jammeh had warned that protests over the election result would not be tolerated, saying The Gambia "does not allow" demonstrations.
No professional international observers were on the ground for the vote, diplomats confirmed, but a small team of African Union experts monitored events along with Banjul-based US and European delegations already present in the country.
A Senegalese security source confirmed to AFP in Dakar that The Gambia had closed the borders on Thursday, a common occurrence during elections in west Africa.
Jammeh seized power in a 1994 coup and had until now survived multiple attempts to remove him from the presidency.
Some 60 percent of the population live in poverty in The Gambia, and a third survive on $1.25 (1.20 euro) or less a day, according to the UN.