Reuters reports the insider at the investment banks as saying the cuts are being made across all divisions and regions, and employees affected are being notified on Monday.
The bank has made no official comment on the story.
According to Thomson Financial Lehman is the largest underwriter of US mortgage bonds, and has suffered in the wake of the subprime crisis.
"There's a structural imbalance in the financial services industry," Michael Poulos, head of financial services in North America at Oliver Wyman, told Reuters.
"Most businesses are built for more volume and higher margins than exist today, and which are likely to exist for the next 12 months or more."
Roger Lister, chief credit officer for financial institutions at DBRS told Bloomberg redundancies in the industry were to be expected across the board.
"I wouldn't interpret it as a sign of weakness for Lehman or any other firm," he said.