The recommendation from officials with the Office of Professional Responsibility was sent to Justice Department leaders but has not been acted on yet, said the person, who spoke on condition of anonymity because the person wasn't authorized to speak publicly about an internal personnel matter.
The report recommended that McCabe be terminated, leaving Sessions in charge of his fate.
The President repeatedly took to Twitter to blast Mr McCabe's role overseeing FBI investigations of the Clinton Foundation - a philanthropic enterprise established by former President Bill Clinton - and of former Democratic presidential nominee Hillary Clinton's use of a private email server when she was Secretary of State.
"That process includes recommendations from career employees and no termination decision is final until the conclusion of that process", she said in a statement.
In January, McCabe was "removed" from his post as deputy director, setting in a motion a plan to leave the bureau after months of conflict-of-interest complaints from Republicans including President Trump.
McCabe has been a frequent target of President Donald Trump. Trump has previously suggested McCabe was biased in favor of Clinton, pointing out that McCabe's wife, who ran as a Democrat for a seat in the Virginia legislature, received hundreds of thousands of dollars in donations from the political action committee of Terry McAuliffe, the former governor of Virginia and a noted Clinton ally. And A Justice Department spokeswoman would not say whether McCabe would be dismissed. The FBI isn't supposed to disclose information about ongoing criminal investigations, but the October 30, 2016, story went into an extraordinary level of detail about turf wars between the FBI and the Justice Department over the handling of the Clinton Foundation probe. Trump asked a year ago.
The Justice Department's inspector general has investigated the decision-making in the Clinton email case, including events and actions involving McCabe. As a result, the report launched an Federal Bureau of Investigation disciplinary process that recommended Mr. McCabe's firing, the newspaper said.
Horowitz told lawmakers during a November congressional hearing that he is aiming to release the report in the "March, April time period".
But their decision to issue a separate report focusing exclusively on McCabe is somewhat unusual, and has enabled Sessions to take disciplinary action before McCabe's retirement date, if he chooses.