Croatian daily Makarska Chronicle said Gaddafi's wife Safia - of Bosnian-Croatian origin - was planning to buy a resort in Igrani town, which before the division of the former Yugoslavia belonged to a Serbian utility company.
Safia was born Sofia Farkas in Yugoslavia in the city of Mostar. The city in present day is in Bosnia-Herzegovina. She is Gaddafi's second and present wife.
The newspaper said the negotiations started when rebel operations to depose Gaddafi intensified in Libya and were in an "advanced phase". Safia and her three children fled to Algeria after rebels took over Tripoli.
Rebel troops have said they have located Gaddafi, believed to be still hiding in Libya, and that it was just a matter of time before he was arrested or killed.
Gaddafi had attended the Yugoslav Air Force Academy. He also had close ties with late Yugoslav ruler Josip Broz Tito.
Published 08 September 2011, 03:57 IST