The 47-year-old singer has been dating 28-year-old British actor Joshua Sasse for just four months, reported OK! magazine.
Minogue was spotted with the sparkler on Thursday night as she left London's trendy Chiltern Firehouse with Joshua.
The pair are said to have recently enjoyed a two-week skiing trip together in Geneva, where Joshua may have decided to pop the question.
"Kylie was smiling from ear to ear and was more than happy to flaunt her diamond ring. It was like she wanted the world to know. The couple recently spent the whole festive period skiing and hired a lodge for friends and family. It would have made a very romantic place for a proposal," a source said.