The smartwatch will be offered in two sizes and will have sensors to track and monitor health, people familiar with the device told the paper.
The company is also expected to add the technology, which is used to transmit data wirelessly over short distances, to the next version of its iPhone, the paper reported.
However, the smartwatch is unlikely to go on sale this year, the people said.
The New York Times followed up reporting on Apple's plans for both the iPhone 6 and the iWatch. The iPhone 6 is expected to come in two different models, one with a 4.7-inch display and one with a 5.5-inch display. Both may come with a new mode that tailors the interface for use with a single hand, allowing for better control over the larger device.
Regarding Apple's smartwatch, the Times also report that t'll come in two sizes and have a variety of health functions. It also reports that the watch will have a flexible display that's covered by sapphire. The Times also reports that the watch will used wireless charging to get power.