The Unbroken singer is thought to be in final negotiations for the show, although a deal is by no means certain, according to The Hollywood Reporter.
> Justin Bieber: 'I'd judge X Factor USA in five years'
Representatives for The X Factor, broadcaster Fox and Lovato have not commented on the reports.
Speculation is currently rife as to who will replace Nicole Scherzinger and Paula Abdul at the judge's table for The X Factor USA's second season, with Miley Cyrus also linked to a judging role today.
It has been reported that while no formal offer has yet been made to Cyrus, show executives including Cowell are considering her for the panel.
Avril Lavigne is said to still be in the running, while Britney Spears is said to be in final negotiations for a spot on the panel.
Cowell has openly said that he would be keen to sit alongside Spears as a judge, saying that he believes she would be a "fascinating" addition to the show.
Former American Idol winner Carrie Underwood recently told Digital Spy that she does not think she is cut out to be a reality show judge.
Watch Demi Lovato's video for 'Give Your Heart a Break' below: