The person who spoke to The Associated Press on the condition of anonymity said he could not do so publicly because of a secrecy order covering the investigation.
The person said he had spoken with several people with direct knowledge of the discussions between prosecutors and Walker's attorney.
The secret investigation, known as a John Doe, began in August 2012 shortly after the Republican governor won a recall election. It focused on alleged illegal campaign fundraising, spending and coordination between conservative groups, Walker's campaign and others during recall elections in both 2011 and 2012.
The investigation has been a distraction for Walker as he runs for re-election against Democrat Mary Burke, a former state commerce secretary and Trek Bicycle Corp. executive. Walker also is considering a run for president in 2016.
U.S. District Judge Rudolph Randa earlier this month halted the investigation, saying the probe violated the free speech rights of the Wisconsin Club for Growth, one of the conservative groups accused of illegally coordinating with Walker's campaign. Prosecutors have appealed that ruling and have asked the 7th U.S. Circuit Court of Appeals to put it on hold.
Under Wisconsin law, prosecutors can launch John Doe investigations that are overseen by judges and conducted largely in secret. Many details about this case have only come to light through leaks and court orders like Randa's ruling.
There always are settlement talks during investigations, but it would be surprising at this point if Walker took a deal, said Mike Maistelman, a Milwaukee attorney who has represented Democratic and Republican elected officials in a variety of cases.
"He's had a number of victories in the courts now," Maistelman said. "I don't think it would behoove him to cut a deal and throw people under the bus, alienate his base, while he's considering a run for president."
The Wall Street Journal first reported in a Wednesday editorial on the negotiations between Walker's attorney and Francis Schmitz, the prosecutor overseeing the investigation.
Walker's attorney, Steven Biskupic, declined to comment Wednesday. Walker, following a tour of a business outside of Milwaukee, also declined to comment when asked about the report.
"As I pointed out before, the bottom line is, per the law, people who know anything about it are prohibited from talking about it, and people who don't know anything about it shouldn't be talking about it," Walker said. "So either way I don't talk about it."
Schmitz also declined to comment, citing the judge's order of secrecy.
David Rivkin, lead attorney for Wisconsin Club for Growth, issued a statement saying reports that Walker and prosecutors are negotiating even as the group continues to fight in court "explodes the myth" that the governor's campaign was working in concert with advocacy groups.
"The business of political campaigns is to elect candidates, but the business of issue advocacy groups is to advance policy beliefs, plain and simple," Rivkin said. "The John Doe prosecutors still don't understand this fact, even when proof of it is staring them in the face from across the negotiating table."