According to All Things D, the Facebook smartphone is being developed as a HTC-produced handset codenamed 'Buffy', after Sarah Michelle Gellar's Buffy the Vampire Slayer.
The device is expected to feature a heavily-customised version of the Android operating system featuring full integration of Facebook functionality, rather than just providing an in-built app.
All Things D claims that the device will run HTML5 as its applications platform, rather than the mobile Flash plug-in, which Adobe recently announced would be discontinued.
The website claims that Facebook, which has long been rumoured to launch a smartphone, only recently decided go with HTC as its hardware partner instead of Samsung, or another manufacturer.
As the partnership is understood to have only just been agreed, it is likely that the Facebook smartphone will not be released for a year to 18 months.
A spokesman for Facebook declined to comment on the 'Buffy' speculation, but said: "Our mobile strategy is simple: We think every mobile device is better if it is deeply social.
"We're working across the entire mobile industry; with operators, hardware manufacturers, OS providers and application developers to bring powerful social experiences to more people around the world."
A Facebook smartphone would provide a boost to HTC's brand and product portfolio, but also offer Facebook with a powerful platform to reach out directly to its members, particularly as more people are using mobile to access the social network.
A recent survey indicated that 50% of children aged 12 to 15 now access social media on a smartphone every week, up from just 33% last year.
Facebook says it has 350m active mobile users, but the company is currently relegated to the status of an app developer, unable to control the eco-system around its service on mobile platforms.
Mark Zuckerberg's firm could use the Facebook smartphone to integrate a range of features, including the Timeline profile service across contacts, communications, calendars and photos.
The handset would also boost Facebook's ambition to become a key distributor of entertainment content, including movies, music, TV shows, and films.
> Facebook's Timeline profile presented by Mad Men's Don Draper