The renovations would include the installation of a retractable glass roof over the entire stadium and the addition of another 7,000 seats, lifting capacity to 90,000.
Newspapers quoted an unnamed source as saying that if the rebuilding went ahead it would ensure Sydney was chosen to stage the final ahead of the 100,000 seat Melbourne Cricket Ground.
"We won't get it with a venue that hasn't changed much since the Olympics because FIFA will want a stadium that's a monument for the world game and even bigger than the Olympics," the source said.
"This makeover will deliver that. It will knock Melbourne out."
The report, which was not confirmed by sporting or government officials, followed a week of bitter public wrangling between the Football Federation of Australia (FFA) and the country's rival football codes over stadium access.
Soccer is played as a summer sport in Australia and struggles to attract the same massive crowds and public interest of Australian Rules (AFL), rugby league (NRL) and rugby union (ARU), which are all played in winter.
Any World Cup held in Australia would have to be played in the coldest time of the southern hemisphere winter to avoid clashing with the European leagues.
That would put the tournament in direct competition with Australia's the most popular sports, who have long term leasing agreements with the biggest venues.
Officials have indicated they would agree to grant the FFA exclusive access to the largest stadiums during a World Cup but are refusing to shut down their competitions for months on end, which is a FIFA requirement.
The domestic dispute is already threatening to scupper Australia's bid, prompting the FFA to ask FIFA to bend the rules and allow their rivals to run their competitions during the World Cup.
