The Amazon console will have a sub-$300 price tag, and was first slated to launch last year but its launch was pushed back to later this year, website VG24/7 reported, citing multiple sources.
The console is expected to allow downloading and streaming of music, movies, TV shows and games, with Amazon's Prime service a central part of the experience, the sources said.
That would put it in direct competition with consoles from Sony, Microsoft and Nintendo.
The version of the hardware presently being shown to "senior publishing sources" is said to be about the same size as the redesigned PlayStation 1.
Popular Android and iOS games have reportedly been used to demo the device to those sources, VG24/7 said.
Amazon subsidiary Lab 126, designers of the company's Kindle devices, is said to be in charge of the console's development.