The newspaper, citing "people familiar with the situation," said Apple has placed orders for key components to used in the new version of the iPhone and that it would be thinner and lighter than the iPhone 4.
Apple released the iPhone 4 in June 2010.
"Apple's sales estimates of the new iPhone is quite aggressive," the Journal quoted a source at one of Apple's parts suppliers as saying.
"(Apple) told us to prepare to help the company meet its goal of 25 million units by the end of the year," the source said.
"The initial production volume will be a few million units," the source said, adding the supplier had been told to ship components to Apple's Taiwan-based assembler Hon Hai in August.
Apple declined to comment on the Journal report.
Financial analysts have been predicting in recent weeks that Apple would begin production of a new iPhone in August and introduce it in September or October.
Apple shares gained 0.67 per cent on Wall Street on Wednesday to close at $351.76.