The California-based company has set up a team of "tens of engineers" to build the version of the operating system that can be integrated in future devices, the Journal said Friday, citing two sources familiar with the project.
It added that Google plans to distribute it for free, much as it did with Android in a move that made it the most popular operating system for smartphones.
However, Google's project faces fierce competition from Facebook, owner of virtual reality headgear star Oculus Rift, among others.
The technology made headlines early in the week as headgear makers took center stage at a Game Developers Conference in San Francisco.
On Wednesday, Sony unveiled a new-generation prototype of its "Morpheus" virtual reality headgear and said a version for consumers is on track for release in the first half of next year.
Smartphone maker HTC and Microsoft with its HoloLens are also heavy hitters in the headgear industry.
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