A deal could be reached as early as this month, unnamed officials were quoted as saying in the report in the online edition of the New York Times on Monday.
But, the same sources also said that the talks might also spill into next year, and there was still a possibility they would break down, which would likely prompt US authorities to sue UBS.
Contacted by AFP on Monday, a spokesman for UBS — the biggest bank in Switzerland — commented merely that the bank's position was unchanged and it had "been cooperating fully with the regulatory and enforcement authorities in connection with Libor investigations."
UBS was the first bank to reveal problems in the rate-setting process of the Libor, otherwise known as the London Inter-Bank Offered Rate, which sets the rate at which banks lend money to each other and also affects a vast range of contracts around the world.
Other banks are also reportedly in advanced talks with regulators about settling allegations that they too manipulated their Libor information, including Royal Bank of Scotland and Deutsche Bank.
Citigroup, JPMorgan Chase and HSBC are also under scrutiny, the New York Times reported.
In June, British bank Barclays was fined $452 million by British and US regulators for attempted manipulation of interbank rates between 2005 and 2009.
The Libor system, a benchmark for short-term interest rates, was found to be open to abuse, with some traders lying about market interest rates to boost positions or make groups seem more secure.