Citing "well-informed sources close to U.S. thinking," the Australian newspaper reported the plan also involves a military strike against North Korean artillery stationed in the hills above the border with South Korea.
The artillery threatens Seoul and about 17,000 U.S. troops stationed south of the Demilitarized Zone.
The Pentagon hardliners said to be behind the plan reportedly believe the precision strikes envisaged in it would not lead to North Korea initiating a general war it would be certain to lose.
The United States would inform North Korea it was not aiming to destroy the regime of Kim Jong-il, but merely destroy its nuclear weapons capacity, the newspaper reported.
However, the Bush administration hasn't made a decision to accept the plan.
Instead, President George W. Bush has emphasized that they believe diplomacy can work with North Korea.
The United States, North Korea and China are scheduled to hold talks in Beijing on Wednesday.