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A spokesman for Scotland's First Minister Alex Salmond played down the reports, saying: "No decision has been taken, either on the application for compassionate release or the application under the prisoner transfer agreement and so it is entirely speculation."
The reports received a mixed reaction from victims' families -- some said it was "inhumane" to keep a seriously ill man in prison, while others were "sick of hearing about compassion and sympathy" for a "mass murderer".
Megrahi's lawyers have been following several paths in a bid to secure his release.
The Scottish government said last month that it had received an application for him to be freed on compassionate grounds.
In May, Libya applied for him to be transferred to his homeland under a prisoner transfer treaty between Libya and Britain.
Megrahi also launched a second appeal against his conviction in April after losing an earlier appeal in 2002.
The 57-year-old was diagnosed with prostate cancer last year.
His lawyer says it has spread to other parts of his body and is at an advanced stage, while his wife Aisha Megrahi told AFP earlier this year that he was "in danger of dying".
Megrahi was sentenced in 2001 by three Scottish judges sitting at an extraordinary tribunal in The Netherlands for blowing up Pan Am flight 103 on the night of December 21, 1988, shortly after it left London for New York.
He was ordered to serve a minimum of 27 years over the bombing, Britain's worst ever terror attack.
The blast killed all 259 on board, and 11 people on the ground died due to falling debris. Many of those on the flight were Americans travelling home for the Christmas holidays.
Frank Rubino, a US lawyer who has been involved in Megrahi's defence, seemed to confirm the reports.
"I have been advised by members of the international defence team that for humanitarian reasons, (he) is being released from prison because he is suffering from a very serious, in fact fatal, disease," he said.
Megrahi was visited in Greenock prison, western Scotland, by MacAskill last week for about an hour, although there was no official comment afterwards.
The BBC reported that the decision to release him was influenced by consensus on all sides that Megrahi should be back in Libya in time for Ramadan, the Islamic holy month next week.
Among the relatives welcoming the news were Briton Jim Swire, whose daughter Flora died on board the plane.
He told Sky News television it was "inhumane" to keep Megrahi in prison and would be "to Scotland's credit" if he was returned home.
But he said he was worried that if Megrahi was released on compassionate grounds, new evidence in his appeal which could prove his conviction was unsafe would not be aired.
Susan Cohen, whose daughter also died in the bombing, told Sky News from the US state of New Jersey that if confirmed, the news would be "a disgrace".
"This man is a mass murderer," she said. "I'm sick of hearing about compassion and sympathy. If the man is ill, he can get treatment in prison. If we send him back, he'll be a hero".
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The reports received a mixed reaction from victims' families -- some said it was "inhumane" to keep a seriously ill man in prison, while others were "sick of hearing about compassion and sympathy" for a "mass murderer".
Megrahi's lawyers have been following several paths in a bid to secure his release.
The Scottish government said last month that it had received an application for him to be freed on compassionate grounds.
In May, Libya applied for him to be transferred to his homeland under a prisoner transfer treaty between Libya and Britain.
Megrahi also launched a second appeal against his conviction in April after losing an earlier appeal in 2002.
The 57-year-old was diagnosed with prostate cancer last year.
His lawyer says it has spread to other parts of his body and is at an advanced stage, while his wife Aisha Megrahi told AFP earlier this year that he was "in danger of dying".
Megrahi was sentenced in 2001 by three Scottish judges sitting at an extraordinary tribunal in The Netherlands for blowing up Pan Am flight 103 on the night of December 21, 1988, shortly after it left London for New York.
He was ordered to serve a minimum of 27 years over the bombing, Britain's worst ever terror attack.
The blast killed all 259 on board, and 11 people on the ground died due to falling debris. Many of those on the flight were Americans travelling home for the Christmas holidays.
Frank Rubino, a US lawyer who has been involved in Megrahi's defence, seemed to confirm the reports.
"I have been advised by members of the international defence team that for humanitarian reasons, (he) is being released from prison because he is suffering from a very serious, in fact fatal, disease," he said.
Megrahi was visited in Greenock prison, western Scotland, by MacAskill last week for about an hour, although there was no official comment afterwards.
The BBC reported that the decision to release him was influenced by consensus on all sides that Megrahi should be back in Libya in time for Ramadan, the Islamic holy month next week.
Among the relatives welcoming the news were Briton Jim Swire, whose daughter Flora died on board the plane.
He told Sky News television it was "inhumane" to keep Megrahi in prison and would be "to Scotland's credit" if he was returned home.
But he said he was worried that if Megrahi was released on compassionate grounds, new evidence in his appeal which could prove his conviction was unsafe would not be aired.
Susan Cohen, whose daughter also died in the bombing, told Sky News from the US state of New Jersey that if confirmed, the news would be "a disgrace".
"This man is a mass murderer," she said. "I'm sick of hearing about compassion and sympathy. If the man is ill, he can get treatment in prison. If we send him back, he'll be a hero".
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