The news comes from Bloomberg citing an anonymous source who claims to be "familiar with the matter".
There's scant detail on what to expect from HTC, except for the confirmation that it will be able to take photographs - as can Samsung's Galaxy Gear - and it will be released in the second half of 2014.
The news comes following recent confirmation from an interview with Peter Chou, CEO of HTC, and Cher Wang, its chairwoman, in which it was revealed that the company expressed interest in making another attempt at tablets and wearables in the future.
Chou, however, is reported to have dismissed the current generation of devices as a "gimmick" and not for people's "day-to-day lives", which gives us some indicators of what to expect from HTC when a smartwatch does come to market.
HTC has often used the idea of making every day a pleasure through its devices and that was one of the founding principles of HTC Sense, the user interface it layers over the top of Android.
We're expecting full-screen weather animation to greet you in the morning and a host of other Sense-inspired features should HTC launch a smartwatch in 2014 as suggested.