The film will be directed by James Bobin of The Muppets.
If Rylance and Disney strike a deal, the actor would play Zanik Hightopp, the Mad Hatter's father, The Wrap reports.
Details surrounding Hightopp and how he plays into the story are being kept under wraps.
The film has already cast Johnny Depp, who is set to reprise his role as the Mad Hatter, along with Mia Wasikowska as Alice and Helena Bonham Carter in the role of the Red Queen.
Sacha Baron Cohen will play a villain named Time in the sequel.
Rylance's credits include The Other Boleyn Girl and Days and Nights.
Watch a clip from the first Alice in Wonderland below: