Ford Motor is reportedly looking to invest around $2.5bn at its plants in Chihuahua and Guanajuato in Mexico.
As part of the plan, the company will spend $1.3bn at Chihuahua plant to build two new diesel engines, which will create about 4,000 jobs.
Ford would manufacture 1.5 liter four-cylinder EcoBoost gasoline engine at Chihuahua plant in line with its plan to produce such engines in North America for the first time.
Currently built in the UK and China, the engine will gradually replace the company's 1.6 liter engine in vehicles such as the Ford Fusion, reported Detroit Free Press.
At Guanajuato plant, Ford will invest $1.2bn to set up a transmission facility.
Reuters cited sources familiar with the matter as saying that the company will make an official announcement in Mexico City by the end of this week.
The proposed investment comes after Ford invested $3bn in 2008 at its Cuautitlan plant to produce Fiesta model.
Ford produces the Fusion subcompact and the Lincoln MKZ at its factory in Sonora.
According to official industry data, Ford has exported 108,417 units during the first quarter with majority of them to the US.
Due to its proximity to the US, Mexico has attracted several multinational automakers as it offer cheaper labor, various free trade agreements.
Toyota Motor is also scouting to set up a $1bn production plant in Mexico, to produce 200,000 Corolla cars a year for the North American market from 2019.