Al-Qaeda in the Arabian Peninsula (AQAP) has trained the Norwegian convert and is understood to have also selected a target, believed to be a US passenger jet, The Sunday Times quoted intelligence sources as saying.
"The Norwegian recruit goes under the name of Muslim Abu Abdurrahman. He is understood to be in his thirties and a 'clean skin', with no previous criminal record," it said.
"He converted in 2008 and quickly became radicalised. He later travelled to Yemen, where he has spent several months, to complete his training," the paper said.
The plot confirms fears among US and British intelligence agencies that al-Qaeda is seeking to recruit radicalised westerners in an attempt to evade airport security, it said.
The Norwegian was believed to have been in the southeastern town of Azzan, the longtime home of AQAP, until last month. He then moved to Dammaj, a town in the north.
The new plot is the terror group's fourth to be detected since 2009, when AQAP sent a Nigerian-born British student on a plane with an underpants bomb. The bomb failed to detonate over Detroit and the man was arrested and jailed.
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In 2010, it sent two bombs hidden in printer cartridges on cargo planes destined for Chicago. They were intercepted and defused in Dubai and Britain, the paper said.
Two months ago, a third plot was averted when a British undercover agent, who had infiltrated AQAP, volunteered to be a suicide bomber. He smuggled out the latest version of the sophisticated underpants bomb to US authorities.
"There is terrorist plotting going on irrespective of the Olympics (from July 27 to August 12). The only thing that connects this to the Olympics is the fact that they are about to happen," said a Whitehall official.