The source, who had been briefed on the smartwatch, said Samsung could unveil its new watch, which will be called the Galaxy Gear, close to the opening of an electronics trade show in Berlin, which opens Sept. 6.
There are already several variations of smartwatches on the market, including Sony's device, now in its second generation. It works by communicating with a smartphone that a user is carrying, perhaps tucked in a pocket or a purse.
Reportedly, Apple is also working on a smartwatch.
Some expect the watches will make a big splash.
"Smart watches will be the most important new product category in consumer electronics since the iPad defined the market for tablets," said Canalys analyst Chris Jones in a statement.
Samsung would not comment on the smartwatch, the Journal said.