The report said Sheik Mohammed Omran, the Melbourne-based leader of the fundamentalist Ahl Sunnah wal Jama'ah, says he was told of the plot only months before the Games.
The sheik said he advised against the plot to bomb targets in Australia and threatened to go to the police.
The report said a separate source supported Omran's revelation. The source said a letter sent to Indonesian terrorist figure Abu Bakar Bashir quoted the Melbourne cleric's view that bombings should not be carried out on Australian soil.
The sheik reportedly learned of the plot through identical twins Abdul Rahman Ayub and Abdul Rahim Ayub. Authorities now believe the twins ran the Australian arm of the terrorist group responsible for the Bali bombing, Jemaah Islamiyah.
The 49-year-old Jordanian born sheik says he does not support terrorism and claims he is a force for peace within Australia's fundamentalist Muslim community.