Apple has kept the screen size of its iPad unchanged at 9.7 inches since the product debuted in January 2010.
In comparison, a smaller Apple tablet will feature a 7.85-inch liquid-crystal display with a lower resolution than the latest iPad, according to the Journal.
The launch of a smaller iPad is seen as Apple's move to stay competitive against rivals such as Google and Amazon, which have introduced 7-inch tablets at just $200.
The cheapest iPad starts from nearly $400.
The Fortune magazine Monday reported that Apple is rumored to be sending out press invitation Oct 10 to a special event, which might be on Oct 17 to unveil a smaller iPad.
Apple has not yet commented on the reports.