The 'Wide Awake' singer, who married comedian Russell Brand on 23 October 2010, is said to be dreading the date this year following the couple's separation after 14 months of marriage.
Perry is keen to "turn it into something positive", according to The Sun, and has decided to host a celebration of the people in her life.
"Katy has been dreading October 23 for weeks now, and has been trying to think of ways to turn it into something positive," an insider said.
"It's her birthday two days later and the last thing she wanted to do was spend that week depressed and miserable, which would then mean not doing anything to celebrate her birthday.
"Her pals have been persuading her to have a huge party or go to Vegas for a few days, but Katy decided on throwing a small gathering at her home.
"She has decided to call it her 'divorce party', and it will be a day of doing what she loves with her favourite people."
Since splitting in December 2011, Brand has been linked to a number of women, including Geri Halliwell, while Perry is rumoured to be in an on-off relationship with John Mayer.
Watch the video for 'The One That Got Away' by Katy Perry below: