Carried by the Daily Mirror, the reports claim the Anfield hero will be named the manager of one of eight teams in the newly created league.
Combining home-grown Indian playing talent with legends like Rivaldo and Marcel Desailly, the league hopes to grow quickly on the model of the MLS and A-League in Australia.
Dalglish recently returned to Liverpool in an advisory role to the club's American owners, Fenway Sports Group.
But it seems he could return to management again, with the Indian Super League scheduled to kick off in January 2014.
The two-month long season will run to March, with former-Manchester United goalkeeping great Peter Schmeichel also tipped to manage one of the eight teams.
The Liverpool fan favourite has managed the Anfield club twice, most recently in 2011. He left the club at the end of the 2011-12 season, having won the Carling Cup trophy on penalties at Wembley Stadium.
Dalglish played for Liverpool for 13 years, making over 350 league appearances, in the process scoring almost 200 goals.