Downsizing from the current 2.4-litre eight-cylinder format, the new engines will be 1.6-litres in capacity and will feature turbo-charging, energy recovery and fuel restrictions.
According to the report, the move is set to improve efficiency by up to 50 per cent, and is said to echo the trend toward smaller, more fuel-efficient engines in road cars - an about face from the current way of Formula 1 setting the trend for road cars.
For those worrying about F1 cars becoming slower than a V8 Supercar, set your mind at ease - the BBC says that the current power levels of around 750bhp will be maintained.
The commercial boss of F1, the ever-grey Bernie Ecclestone said he wasn't happy with the agreement.
He told BBC Sport: "We have a very good engine formula. Why should we change it to something that is going to cost millions of pounds and that nobody wants and that could end up with one manufacturer getting a big advantage?"
According to the new rules, there would be no cost advantage, though, to certain teams, with certain regulations ensuring no one team could benefit. KERS would increase its power from 60kW to 120kW, fuel flow will be restricted, plus there will be a maximum fuel capacity for races.
The FIA is said to make an announcement regarding the future engines this Friday.