The job cuts are expected to be officially announced within the next two weeks and represent nearly 7% of America Online's 16,000 workforce.
It is understood that the cuts will affect AOL's brand-marketing employees in Dulles, Virginia, as well as its staff at Netscape in Mountain View, California, according to reports in the Washington Post.
Overall, the layoffs will affect slightly more than 1% of AOL Time Warner's total workforce of 90,000 employees worldwide.
According to the paper, sources also said the layoffs may be combined with an early buyout programme, which would offer employees who choose to leave, a way of speeding up the vesting of their stock options in the company before their scheduled maturity in January.
AOL declined to comment on the redundancies but word of another round of cuts has rippled through the company in the past few weeks.
The cutbacks are the latest in a series of job losses at AOL in recent months, but this round is the biggest to strike AOL since it slashed 850 staff in April 1999 after purchasing Netscape.
Earlier this month, early retirement packages were offered to 535 employees at AOL's publishing unit and about 300 had taken up the offer.