Priced at £100 to compete with Amazon's Kindle Fire, it is set to come pre-loaded with content and apps including Tesco's movie, music and e-book subscription service Blinkbox.
The move is part of a turnaround plan that has already seen it snap up restaurant chain Giraffe and Harris + Hoole coffee shops. Tesco declined to comment on the reports.
The supermarket has been looking to reinvigorate its business since annual profits fell for the first time in decades in April.
Ovum technology analyst Nick Dillon said of the tablet rumours:"The risks are quite high for a fully-integrated strategy because Tesco is not a technology company, but the rewards would be high, too."