The previous Socialist government passed a law in 2010 allowing women to have a termination up to 14 weeks into a pregnancy or up to 22 weeks in cases of severe abnormalities, in line with most European countries.
The ruling People's Party, which came to power in December and holds an absolute majority in Parliament, is expected to present a bill which scraps that law in October, based on the recommendations of a committee of experts, the source said.
Economic reforms such as sweeping changes to labor law have dominated the government's agenda up to now as it fights to stave off a full European rescue against a background of soaring borrowing costs.
Justice Minister Alberto Ruiz-Gallardon last month made clear his opposition to the current abortion law.
"I can't understand how protection is removed from the fetus, permitting abortion, merely because it has some kind of disability or malformation," he said in an interview with
right-wing newspaper La Razon.
A spokesman for the justice ministry said there had been no law change proposed as yet.
Any move would keep a campaign promise made by Prime Minister Mariano Rajoy to overturn the 2010 law of the government of then Prime Minister Jose Luis Rodriguez Zapatero.
It would bring Spain in line with traditionally Catholic nations like Ireland and Malta.
Critics said the People's Party was seeking to placate its core right-wing supporters at a difficult time of Europe-imposed spending cuts and tax hikes.
PROTESTS ON BOTH SIDES
When Zapatero liberalized the abortion law, prominent People's Party members and Spain's Catholic Church led tens of thousands of protesters in demonstrations.
Pro-abortion groups and the opposition Socialists said a change in the law would push Spanish society back decades to the period of the right-wing dictatorship of Francisco Franco when abortion was banned.
They said denying women the right to terminate a pregnancy in the case of a malformed fetus was inhumane.
"The law doesn't force anyone to have an abortion if there's abnormality, but you can't prevent women going for that option if there is a serious malformation," said Luis Enrique Sanchez, chairman of the State Family Planning Federation.
About 2 percent of the 600,000 pregnancies per year in Spain involve damaged fetuses, of which only one in four ends in abortion, according to data from the State Family Planning Association.
"In many cases we're talking about seriously deformed fetuses. I've been doing this 28 years and women don't get abortions because of something like a cleft palate," said Santiago Barambio, chairman of an abortion clinic association.
Abortion was first decriminalized in Spain in 1985 in the cases of a malformed fetuses, rape
or potential mental or physical damage to the mother.
In practice until the Zapatero law, which made abortions available on demand, terminations were still possible in private clinics without any time restriction under the potential mental damage proviso.
Anti-abortion activists welcomed the government's proposed changes and some said they hoped Spain would eventually ban abortion in all circumstances, including cases of rape.
The Right to Life association recommended the government make adoption easier and give more help to pregnant women.