The singer has been working on new material at a studio in Los Angeles, musician David Hidalgo confirmed.
Hidalgo has contributed to two previous Dylan albums and revealed that his latest collection will have a Mexican influence.
"It was a great experience. And different. Each one has been different, all completely different approaches. It's an amazing thing, how he keeps creativity. I don't see how he does it," Hidalgo told The Aspen Times.
Speaking of playing his tres - a guitar-like instrument - he added: "[Dylan] would say, 'Wow, what's that?' He liked the sound. So we'd get it in there."
It is unclear when Dylan, who has released 34 studio albums in his career, plans to release his latest record.
Watch Bob Dylan perform 'Knockin' on Heaven's Door' below: