NBC News and the Wall Street Journal reported the government will add its weight to the suit and claim that Armstrong defrauded tax-payers by using performance-enhancing drugs while on the state-funded US Postal Service team.
NBC News said the Justice Department filed papers in a federal court on Friday to join the lawsuit filed by Floyd Landis, himself an admitted dope cheat who lost the 2006 Tour de France crown because of doping.
The Justice Department did not immediately respond to a request for comment.
The Journal said the lawsuit was based on the False Claims Act, which allows citizens to sue for alleged fraud against the government and receive as much as a third of any money recovered.
The law would allow the plaintiffs to recover as much as triple the amount of the 1999 to 2004 sponsorship, which was worth an estimated $30 million, according to the Journal.
Armstrong, 41, admitted to Oprah Winfrey last month that he used performance-enhancing drugs during his record seven Tour de France championships from 1999-2005.
All seven titles were stripped from him last year after a devastating report by the United States Anti-Doping Agency (USADA), which accused the cyclist of taking part in one of the biggest cheating operations in sports history.
Armstrong said on Wednesday that he would not cooperate with a USADA probe into dope cheats in cycling but would be willing to help other anti-doping inquiries.
Armstrong's move diminished his chances of having his life ban from World Anti-Doping Agency sanctioned sports, even as it forces USADA to move ahead without his help in looking into others involved in doping.
USADA head Travis T. Tygart had asked that Armstrong testify under oath on what he knew about such subjects as cycling team manager Johan Bruyneel's role in the conspiracy, details of how the scheme unfolded or if International Cycling Union (ICU) officials knew about it.
In addition to Landis's lawsuit, a Texas insurance firm lodged a suit against Armstrong on February 7 seeking $12 million for bonus money paid to the cyclist for the Tour de France triumphs that are now null and void.
In his television confessional to Oprah Winfrey last month, Armstrong contradicted several parts of USADA's investigation, saying he had stopped doping after 2005 and was not a ringleader in the doping program.
Tygart, in a later television interview, said Armstrong had lied to Winfrey because USADA evidence showed he was doping when he rode in the Tour de France two final times in 2009 and 2010.