The 'Reach' group are said to be planning a series of UK gigs in the summer, as well as the possibility of releasing two albums, including a new Greatest Hits collection.
The group consisting of Hannah Spearritt, Paul Cattermole, Jo O'Meara, Rachel Stevens, Tina Barrett, Jon Lee and Bradley McIntosh have reportedly decided to reunite to coincide with landmarks events in the UK this summer, such as the Olympics and Queen Elizabeth II's Diamond Jubilee.
"The guys have been inundated with approaches and offers over the past three years, but always said no," a source told The Mirror.
"But following a series of talks and meetings, they decided to go for it. What with the Olympics coming up and the Queen's Diamond Jubilee concert, there's a real British feel-good factor at the moment."
The insider added: "The band figured it was a case of now or never. And if the gigs go well there is the option to release a new album, plus a Greatest Hits.
"Everyone is really excited - and frantically getting back in shape".
S Club 7 were rumoured to be planning a comeback - including a new TV show - late last year.
Digital Spy users voted S Club 7 as their most wanted group to reform following other high-profile acts on the comeback trail.
Steps made their own comeback last year to great success - including a number one album and announcement of a UK tour.
S Club 7 achieved four UK number one singles, a number one album and over 17 million record sales worldwide during their five-year stint.
Watch the video for S Club 7's 'Don't Stop Movin'' below: