The mysterious festival will take place over three days at New Mexico's Spaceport America.
The 27-year-old 'Applause' hitmaker performance is said to be planned for the third day of the concert series at dawn, reported the New York Daily News.
"She has to do a month of vocal training because of the atmosphere. Gaga has taken out a ridiculous life insurance policy!," a source said.
The event will mark the first time that a pop artiste has performed in space.
Justin Bieber, Katy Perry, Rihanna and Lance Bass have all signed up to take a ride on the Virgin Galactic ship when it launches.