According to a report in The Wall Street Journal, the new venture is to be led by David Drummond, Google's senior vice-president of corporate development and chief legal officer.
He will work alongside William Marisa, a former web hosting entrepreneur that Google has hired to help set up the venture.
It is not the first time that Google has talked about launching such a venture as it looks to offer its expertise, money, reach and distribution to start-up firms.
The move will take Google into territory already occupied by a number of media and technology firms including Intel, Motorola and Comcast, which have already launched their own venture capital businesses.
Other companies like Walt Disney and Amazon have less formal investment operations, but have each invested in start-ups. Microsoft is another. It was an early investor in Facebook among others.
The hope is that by investing seed capital in these businesses investors will reap major rewards as companies float or are acquired.
The move marks a change in strategy by Google, which has previously opted to buy companies outright rather than sit on board as an investor. It has snapped up dozens of businesses including micro-blogging firm Jaiku; social network service Zingku; aerial photography firm Image America; voice over internet protocol operations GrandCentral; and web feed FeedBurner among others.