The company is considering the bank's two co-presidents Harvey Schwartz and David Solomon for the top spot.
Solomon is an investment banker and advisor with an impressive track record who's worked directly with some of Goldman Sachs' most important clients.
An executive at a rival bank said the industry had expected Blankfein - one of the longest-serving CEOs on Wall Street - to leave at some point, but the timing of the departure was surprising.
Leslie Shribman, Goldman's vice president of media relations, declined to comment on the matter. Blankfein will probably retire ahead of the bank's 150th anniversary in 2019, or early that year, the paper reported.
CBS News reports that with the recent White House exit of Gary Cohn, the former President and Co-Chief Operating Officer at Goldman, the era of Goldman's influence at the White House is waning.
Shares in the bank initially fell slightly on the news, first reported by The Wall Street Journal, on Friday but quickly rebounded to be in line with the rest of the market. He rose through the firm's trading business and took the top job in 2006, when Hank Paulson left to become Treasury secretary.
Blankfein in his later years has become more outspoken about his views. He was considered at the time as the most likely successor to Blankfein. Even though he supported Hillary Clinton during the 2016 election, Blankfein recently told CNN the economy is "higher" under Trump than if Clinton had won.
Blankfein, 63, was diagnosed with lymphoma, which Goldman disclosed to investors in September 2015. A year later the CEO announced he was in remission and, according to the source, the cancer has nothing to do with the departure.
Although Blankfein is credited with getting Goldman Sachs back on its feet after the crisis, its trading division has struggled in recent years, and some analysts have faulted Blankfein's leadership.