According to The Sun, BBC bosses have axed the 66-year-old choreographer because they want to "inject some youthful glamour" into the panel.
Craig Revel Horwood, 44, Bruno Tonioli, 53, and Len Goodman, 65, will all apparently return alongside host Bruce Forsyth, 81.
"It's nothing personal against Arlene - she's been brilliant," said a source. "But the bosses want to bring in younger viewers - the 16- to 34-year-olds that The X Factor mops up."
Speaking about her replacement, the insider said: "Nothing has been signed, but bosses really want Alesha as she has everything they're looking for.
"She also knows a thing or two about dancing. Strictly can feel a bit old fashioned."
Dixon, 30, won the show in 2007 and was described as the "British Beyoncé" by Forsyth.
Producers are also reportedly hoping to recruit more American professional dancers for the new series, which will air in the autumn.