The deal, according to L'Equipe, will run from November this year until April 2008.
Toulon president Mourad Boudjellal, a local businessman who is investing heavily in the club in an attempt to recover its top-flight status, has already managed to attract the likes of former New Zealand captain Tana Umaga and England World Cup-winner Dan Luger.
And he is confident Gregan will be the next big name to sign up.
"For Umaga, it took us three days," he said. "We will see if we can do this one in two days."
Boudjellal claimed he paid Umaga's wages - believed to be around 300,000 euros (Ã0Â£200,000) - out of his own pocket, and he is expected to do the same should Gregan agree terms.
Gregan, who in September will appear in his last World Cup, has played 127 times for the Wallabies.