The 1980s indie band, which featured Morrissey, Johnny Marr, Andy Rourke and Mike Joyce, have been offered £2.8 million by organisers, according to The Sun.
Morrissey has repeatedly ruled out the idea of reforming the group during interviews, once claiming: "I'd rather eat my own testicles than reform The Smiths - and that's saying something coming from a vegetarian."
Rifts between the group developed further in 1996 when Joyce successfully sued Marr and Morrissey for unpaid royalties.
However, the singer's manager Irving Azoff is reportedly keen for the band members to resolve their differences.
"It has looked impossible in the past but suddenly it all looks like it could happen," said a source.
"The buzz around the people who used to work for the band is they could play Coachella for a ludicrous amount of money. It's closer than it ever has been. The split was a messy affair, but time's a healer."
The Smiths split in 1987 after releasing the seminal albums The Smiths, Meat Is Murder, The Queen Is Dead and Strangeways Here We Come.