The Wall Street Journal, citing unidentified people familiar with the matter, said Citigroup executives plan to present the idea to the Treasury Department soon.
The newspaper said in a report published Monday on its Web site that executives expect an offering could be made in the fourth quarter.
A Citigroup spokesman declined on Tuesday to comment on the report.
The New York-based bank has been among the hardest hit by the recession as loan losses have mounted amid rising defaults. Citi received $45 billion in bailout funds from the government, a portion of which was recently converted to a 34 percent ownership stake in the bank.
The government holds about 7.69 billion of the 22.88 billion outstanding common shares of Citigroup.
As part of Citigroup's plan, the Journal said the government would sell an undetermined number of shares while Citi would sell as much as $5 billion in new shares. The money raised through the issuance of the new shares would be used to help repay a portion of the government bailout funds the bank received that were not converted to common stock, the Journal said.
The government acquired its shares of Citi at a price of about $3.25 per share. If the government were to sell its stake based on Monday's closing price of $4.52, it would book a profit of about $9.77 billion on the sale.
Shares of Citigroup fell 22 cents, or 4.9 percent, to $4.30 in morning trading Tuesday.