The Australian Federal Police will become the lead agency within the coalition's proposed homeland security department.
Under the arrangement, however, spy agencies ASIO and ASIS would remain under the control of the attorney-general, News Corp Australia reports.
A radical restructure across the top tiers of government is also under consideration and could be rolled out within weeks.
The departure of Department of Prime Minister and Cabinet boss Ian Watt is believed to be a first step, while other bureaucrats with national security responsibilities also will be replaced.
The Daily Telegraph reports the government's favoured homeland security model will bring the AFP and its counterterrorism functions under a single umbrella with customs, immigration, border protection, the Australian Crime Commission, Austrac and emergency management.
The shake-up will mean the AFP is elevated to portfolio responsibility under a cabinet minister with a permanent seat on the National Security Committee, rather than the relatively junior ministerial responsibility of justice.
The overall responsibility for homeland security will likely be handed to Immigration Minister Scott Morrison.
