If the Cupertino, CA-based tech giant green lights the product, it would be introduced in 2018 at the earliest, Bloomberg's report said.
Apple has not responded to CNBC's request for comment.
Plans of the new wearable comes after Apple recently reported its first annual revenue decline in 15 years and is searching for new growth drivers. The Apple Watch hasn't really taken off but chief executive Tim Cook is bullish on the potential of AR.
AR technology imposes digital images over the real world, while virtual reality (VR) is about immersing a user in a computer-generated experience via a headset. In an interview with "Good Morning America" in September, Cook said AR will be bigger than VR "because this gives the capability for both of us to sit and be very present talking to each other, but also have other things visually for both of us to see."
Apple's rivals have been pouring a lot of money into VR with the likes of Samsung, HTC and Google selling their own headsets with the development of AR glasses much less prevalent. Microsoft's HoloLens headset is probably the closest product on the market and imposes holograms onto the real world which users can interact with through gestures.
But Cook said AR has more potential and that VR "encloses and immerses the person into an experience that can be really cool but probably has a lower commercial interest over time."
Digital glasses could prove to be a risky move for Apple. The last attempt came in the form of Google Glass which was killed off by the company last year. Some of the criticisms around Glass included its design and usability. Apple will need to counter these problems to make its version appealing should it ever come to market.
Read the full Bloomberg report here.