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The Guardian said based on interviews in the US and Pakistan, it can confirm that Davis, a former special forces soldier is employed by the CIA.
It quoted a senior Pakistani intelligence official as saying that "it`s beyond a shadow of doubt".
This may complicate US efforts to seek the release of Davis, who claims to have fired in self-defence when the two attempted to rob him.
37-year-old Davis has been charged with murder. He shot at two men who had pulled up in front of his car at a traffic signal on January 25.
In Islamabad, Pakistan Prime Minister Yousuf Raza Gilani said his government would deal with the matter without compromising national interests.
"You should not be worried. There is a responsible government and it is working in the country`s interest," he said when asked by reporters about Davis being a CIA operative.
Davis was engaged in espionage and surveillance activities and was on a mission when the incident happened, claimed Punjab`s law minister Rana Sanaullah.
Davis is now lodged in the Kot Lakhpat jail in Lahore where additional security forces have been deployed.
The Obama administration has demanded the release of Davis contending that he is an "administrative and technical official" attached to its Lahore consulate and that he enjoys diplomatic immunity.
A petition relating to his diplomatic status is pending before a Lahore court. The next hearing is on March 14.
The Guardian said the Pakistani government was aware of Davis`s CIA status but had kept quiet in the face of intense US pressure.
Another report said Davis was hired on contract by the American intelligence agency and was not a regular staff.
Efforts were also underway to see whether a "blood money" deal can be arrived at under which the families of the two victims withdraw the charges against Davis in return for money.
Discounting his contention of self-defence, police in Lahore said Davis used excessive force as he fired 10 shots and even got out of his car to shoot dead one of the two men who was fleeing.
A third man was crushed when a speeding vehicle with American officials rushed to the aid of Davis overrunning the motorcyclist. Pakistani officials believe its occupants who have since left the country were from CIA.
With Davis continuing to be in custody, the US has deferred high-level talks with Pakistan and Afghanistan amid reports that Washington may slice US aid to Islamabad.
