The review - which will focus on whether the London-based bank should exit business that is balance sheet heavy and low-return - is already under way and will be completed by summer, sources said.
The Financial Times said the review could result in thousands of job cuts and the possible departure of the co-heads of the investment bank, Tom King and Eric Bommensath.
A spokesman for Barclays said there were no plans for any change in leadership in the investment bank. The bank declined further comment.
The shake-up comes after an angry reaction from shareholders to news last month that Barclays had increased bonus payments by 10% last year to 2.4 billion pounds, despite of a one-third fall in its pre-tax profits.
Critics said Chief Executive Antony Jenkins needed to get greater control over costs in his investment bank, especially after he said in a newspaper interview that he had been forced to raise pay for investment bankers in the United States to prevent a "death spiral" at the bank.
The aim of the investment bank review will be to improve profitability, the source said. The division last year generated a return on equity of 8.2% - below its cost of capital - while its ratio of costs to income increased from 39.6 to 43.2%.
Tougher regulations and weak trading in fixed income, which generates most of the profits at Barclays' investment bank, are putting ever greater pressure on returns. The bank was forced to improve its leverage ratio last year, which also influences the future size of the investment bank.
Fixed income revenues have remained under pressure this year after a slump in the second half of last year, with Deutsche Bank on Thursday saying it had had a "slow" start to the year, following similar warnings from Citigroup and JPMorgan .
That means any improvement in profitability is likely to have to come from cost cuts.
Other banks are shrinking their fixed income operations and allocating capital to equities or advisory units, or into other areas of commercial banking.
The row over pay has put Barclays on a collision course with investors, some of whom are threatening to vote against the bank's remuneration plan at its annual shareholder meeting next month. Jenkins is meeting investors to explain the reasoning and his long-term vision for the investment bank.
Jenkins has repeatedly said he will keep a significant sized investment bank, which contributes about half of group earnings.