Migration forecasts currently factor in a 6250-person reduction in humanitarian placements from the beginning of the 27/28 financial year.
A 2023 decision to increase the intake to 20,000 is set to lapse and revert to 13,750 at the next federal budget.
A final decision is not settled and is likely to link to next year's budget process, a Home Affairs spokesman said.
But Greens Senator David Shoebridge said the move was remarkable, accusing Labor of pandering to One Nation.
"We need a prime minister and a government not to surrender to some minor right-wing party in parliament, but to show leadership at once, and they are comprehensively failing that leadership," he told reporters.
"When I talk to the community, they don't want Australia to become meaner and nastier. They want Australia to live up to its principles, giving people a fair go."
The potential move comes a month after Labor's national conference, where delegates committed to a 20,000-place humanitarian intake, and to shoot for 27,000 a year.
The Asylum Seeker Resource Centre said it was deeply shocked and surprised by a possible cut.
""If these reports are true, it would mean the government is increasingly willing to let far-right voices dictate the terms of the migration debate, even when that means abandoning its values," deputy chief executive Jana Favero said.
"The government has a critical choice before it - play into the far-right's hateful and divisive politics and follow them down a Trumpian path, or show strength and leadership by honouring its humanitarian commitments."
Speaking at a regional summit, Anthony Albanese rejected the numbers marked a concession to One Nation.
"We're responding to the national need. Something we said well before," the prime minister said at the Dubbo Bush Summit.
"There is a current spike in support for One Nation ... we started lowering numbers well before that occurred because we recognise we want to get that right to assist the Australian economy."
Labor caucus continues to debate its position on migration, leading Home Affairs Minister Tony Burke to pull out of a supposed migration announcement slated for a national address in early August.