The ‘Part Of Me’ hitmaker appeared as a guest judge on the show in 2010 for the Dublin auditions.
Popstar pal Justin Beiber revealed yesterday that Katy was hoping to move to London and join the show.
The People now report that X Factor bosses are currently finalising the deal.
“Simon and the producers are really keen to get Katy, she was excellent last time. Advanced talks are taking place,” a source told the newspaper.
The publication claims that former X Factor judge Dannii Minogue will not be returning, despite being the favourite to replace Kelly.
Dannii has already started work on Australia’s Got Talent, which will clash with this year’s auditions as it did last year.
A spokesperson for The X Factor said an announcement about the panel would be made “in due course”.