The launch of such a device would mark the first time Google has designed and marketed a consumer electronic device under the Google brand.
Google has declined to comment on the speculation that was kicked off by a Wall Street Journal story.
News of the device is based on a filing with the Federal Communications Commission, with testing due to take place in Google's Mountain View headquarters in California and three other cities.
Up until now, Google's forays into hardware have been restricted to opening up its Android mobile operating system to mobile manufacturers, and the launch of its Google TV platform, which is being made available on LG and Sony devices.
News of the rumoured home-entertainment system comes after Google agreed to buy mobile phone business Mobile Mobility in August for $12.5bn (£7.7bn) in order to boost its hardware capabilities.
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This article was first published on marketingmagazine.co.uk