According to a report in the Evening Standard, Dyke is to hire a team of independent lawyers to evaluate whether there are grounds to contest last week's Hutton Report, which was damning of the BBC and cleared the government.
As well as Dyke the report cost BBC chairman Gavyn Davies and BBC 'Today' programme reporter Andrew Gilligan their jobs.
News of Dyke's possible legal action comes as Prime Minister Tony Blair looked like giving the go-ahead into a wider inquiry questioning the failure to find weapons of mass destruction in Iraq. Blair's move follows that of US President George W Bush, who at the weekend bowed to pressure for an investigation in Washington.
At the weekend Dyke revealed that he was forced to quit as director-general of the BBC by the corporation's governors.
Dyke told them he would go if they did not fully support him and they agreed he should go.
Dyke also revealed on BBC One's 'Breakfast with Frost' that the entire board of governors had considered quitting but he argued against them going.
"I urged them not to all go, you can't have a BBC with nobody there."
In an interview in The Sunday Times he accused Downing Street of "systematically bullying" and intimidating the BBC over its coverage of the war in Iraq.
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