0736 GMT November 22, 2019
The pro-Beijing leader has faced sustained criticism from protesters in the semi-autonomous city.
So far, the Chinese central government has given its support to her and the Hong Kong police, condemning the violent protests.
But according to the FT report, which quoted unnamed figures briefed on the deliberations, Beijing is now drawing up a plan to replace her with an interim chief executive.
However, sources told the newspaper that the plan would depend on the situation in the city first stabilizing so that the central government is not seen as giving into violence.
Beijing rejected the report as "a political rumor with ulterior motives".
"The central government firmly supports Hong Kong Chief Executive Carrie Lam... to put an end to violence and chaos and restore order as soon as possible," Foreign Ministry spokeswoman Hua Chunying told a press briefing.
Lam's office said it would not comment on speculation.
Hong Kong has been battered by 20 weeks of protests and with no political solution in sight, clashes have intensified each month.
Earlier this month, Lam – who has refused to grant any major concessions to protesters – invoked a law to ban face masks, setting off a new wave of protests and vandalism that shut down much of the city's transport network.
One of the protest leaders, Jimmy Sham, was hospitalized after being attacked by unknown assailants wielding hammers last week.
If President Xi Jinping decides to go ahead with the plan to remove Lam, the report said her replacement would be installed by March.
Leading candidates being considered to replace her reportedly include Norman Chan, former head of the Hong Kong Monetary Authority, and Henry Tang, who has also served as the territory's financial secretary and chief secretary for administration.
Tang said in a statement that he supported Lam and would not comment on speculation.
Lam's ouster may not be enough to allay the concerns of Hong Kong's protesters.
"The plan definitely has come too late as Carrie Lam's net support... dropped to a disastrous level as early as four months ago," said political analyst Dixon Sing.
"It is impossible to believe that Hong Kong people... would be happy and go back home once Carrie Lam has stepped down."
A leaked audio recording emerged in September of Lam saying she would quit if she had a choice – although she later said she had not contemplated standing down.
Her resignation is not one of the protesters' five central demands, who are instead calling for measures including an investigation into police brutality, universal suffrage and the release without charge of arrested protesters.
"I don't think replacing Carrie Lam could solve the problem completely," 18-year-old student Joyce Ho told AFP.
"If the government can respond to the five demands, I believe Hong Kongers would stop (the protests)."
'No popular legitimacy'
Lam has faced a series of political difficulties since the city's legislature returned for a new session last week.
She was unable to give her State of the Union-style policy speech after opposition lawmakers repeatedly interrupted her, forcing her to deliver the address via video.