The pair, who apparently fell out when Cole was axed from X Factor USA, are said to have put their differences aside to work on the new project.
The show will be a talent search but will be "very different" to Britain's Got Talent, according to The Mail On Sunday.
Cowell's production company Syco will make the show, which is likely to air in the autumn.
"Cheryl's finally stepped back into the fold. All's well between them again. Despite what happened last year, she's agreed to do something with Simon," a source told the paper.
"Until Simon returns from his break in the Caribbean, he and Cheryl can't fine-tune any plans, but he's set aside time next month to do so. The main thing is he's convinced Cheryl is immensely valuable.
"The audience warms to her, and that's worth money to Simon. Now that Cheryl's stopped ignoring him, he'll bend over backwards when they meet. She'll very much be part of the decision-making process."
Speaking of reports that Cole is planning a Channel 4 talkshow, the source added: "Cheryl doesn't want to be a judge and she doesn't want to delve into people's private lives on a chatshow."
Cole apparently turned down a role on Britain's Got Talent earlier in the year, which Cowell suggested as a peace offering. Alesha Dixon recently joined the show.