A draft copy of a report from the Parliamentary Commission on Banking Standards has recommended breaking up the taxpayer-backed lender, according to the BBC.
It is understood the draft version of the highly-anticipated report from the commission was sent to its members in the last week and they have until Monday to read it through, with a final report due by the end of the month.
The recommendation to split RBS would be awkward for Mr Osborne, given the pressure to start recouping taxpayer cash in the part-nationalised banks before the 2015 election.
It is thought Mr Osborne and Prime Minister David Cameron are not keen on a break-up of RBS, which could delay returning it to the private sector and may be seen as a second state bailout of the banking giant.
RBS itself has claimed it is well on the road to recovery despite reporting losses of £5.2 billion for 2012, driven by a £390 million settlement for rate-fixing, £1.1 billion provision for mis-selling and IT glitches.
However, outgoing Bank of England governor Sir Mervyn King has also said he believed RBS should be broken up in an attack on the handling of the bank's future in a parliamentary hearing in March.
It is believed the commission has been strongly influenced by Sir Mervyn's views and sees a break-up as a way of freeing the bank from residual bad debts, which could help it to lend more to businesses and boost the economy.
The so-called "bad" bank would be held on to by the Government, avoiding the need for a fire sale of the more toxic assets and allowing them to recover in value. But the Treasury is reportedly considering the alternative of transferring the group's troubled Ulster Bank operations to the Irish government in an effort to shore up RBS's balance sheet.