A report published in Germany's Bild tabloid cited a draft of the mandate that the Cabinet was planning to put before the parliament next Wednesday.
According to Bild, a "secret" meeting between German Defense Minister Ursula von der Leyen, Foreign Minister Frank-Walter Steinmeier, Interior Minister Thomas de Maiziere and Justice Minister Heiko Maas is scheduled to take place later on Thursday, on the margins of a Cabinet meeting in Berlin.
There are already German troops on the ground, but their mandate is limited to training Kurdish fighters to use the weapons that Berlin has been delivering to the fighters since September.
According to governmental documents at the disposal of the Bild newspaper, the extra troops could be dispatched to Iraq over the span of the next year.
The Islamic State is a Sunni extremist group formed in 2006. It has been fighting the Syrian government since 2012. In June 2014, the militants extended their attacks to Iraq and proclaimed a caliphate on the seized territories. Several thousands of people have been killed as a result of fighting, with hundreds of thousands being displaced. Islamists are also suspected of holding several thousands of people captive.