Citing sources inside AOL, the report said the lay-offs would be substantial and announced soon.
AOL Time Warner could not be reached for comment.
AOL has been badly hit by falling advertising revenue. Last month, the media and online conglomerate announced second-quarter earnings that failed to meet analysts' expectations.
At the time, AOL president and CEO Gerald Levin warned that "permanent cost management would be a way of life" for the company.