Japanese site Macotakara cites inside sources claiming that the update is scheduled to be announced at the annual iPod event in October.
The move would see iPod nano users gain access to iTunes in the Cloud service, enabling them to sync all previous music purchases with their players.
Apple is not expected to confirm Wi-Fi support for the iPod nano at the unveiling of its new iPhone next month, but it has been speculated that it could coincide with the launch of the rumoured iPad Mini.
Earlier this year, it was reported that Apple is planning to add a low-grade camera to its next iPod nano, but this remains unconfirmed.
Apple will unveil its next iPhone on September 12.