The actor could receive $25 million (£16 million) from the production company behind Two and a Half Men if he drops litigation against them, according to the Los Angeles Times.
Sheen filed a lawsuit for unfair dismissal against Warner Bros and show creator Chuck Lorre in March. He was said to seeking $100 million (£63.8 million) in compensation. The case is being handled by a private arbitrator.
A spokesperson for Warner Bros has not confirmed reports of a settlement and declined to comment further, while Sheen's lawyer has not yet commented on the speculation.
Industry insiders also told The Hollywood Reporter that Lorre would not have to pay Sheen any money if the actor drops his claim.
Sheen told the audience at last night's Primetime Emmy Awards that he wished the cast and crew of Two and a Half Men the best "from the bottom of my heart".
The show returned on CBS tonight with Ashton Kutcher taking the lead role as lovelorn internet billionaire Walden Schmidt.
Watch the new opening title sequence to Two and a Half Men below: