Mugabe plans to step down after the next election, handing power to Mnangagwa, the newspaper reported. There have been signs Mnangagwa is the heir apparent, including a recent trip to Iran where he met with President Mahmoud Ahmadinejad.
Mnangagwa, 65, was a close ally of Mugabe during the struggle to end white rule in what was then Rhodesia. He became deaf in one ear during police torture.
Known as the "Crocodile," Mnangagwa headed Zimbabwe's Central Intelligence Organization. He was Mugabe's campaign manager during the 2008 election when Morgan Tsvangirai, head of the Movement for Democratic Change, withdrew from a runoff he called a "violent sham."
Mugabe, 88, has ruled Zimbabwe since the end of white rule. The handover to Mnangagwa would help protect leaders in the Zimbabwe African National Union-Patriotic Front from scrutiny for land takings and other actions during the past three decades.
Tsvangirai, now the prime minister in a coalition government, says he has been warned "anyone other than President Mugabe, even if they win an election, will not be able to take up their mandate." The MDC has also accused Zanu-PF of recruiting young men for a vote-rigging campaign.