The needle is believed to have been obtained secretly and is apparently being offered around Las Vegas auction houses.
Michael Jackson's family are said to have been informed by lawyers representing the unnamed seller and are reportedly desperate to stop the sale.
The bizarre artefact could go under the hammer on June 25 – the first anniversary of the singer's death in Los Angeles.
His personal doctor, Conrad Murray, 57, has been charged with involuntary manslaughter after allegedly administering drugs such as Valium, lorazepam and propofol to the troubled star.
An autopsy found that Jackson died from "lethal levels" of propofol, a powerful anaesthetic. The syringe set to go on sale is said to be the one used to administer the fatal dose.
A source told
The Mirror: "This is one of the sickest lots ever put up. The syringe is no longer needed in the inquest or in murray's forthcoming trial but the moral implications don't bear thinking about.
"The guy who has possession of the needle has been in meetings with his legal team, making sure it is legitimate and his to sell. The plan is to flog it for up to $5 million in a big Vegas casino but he's been told he may have to sell it somewhere that doesn't have 'reciprocal legal agreements with the United States', such as Brazil or even Libya.
"The validity of the sale is a matter of interpretation, dependent on whether the DA believes a crime has even been committed. Rumours are leaking thick and fast and the Jackson family are aware of the auction plan.
"They are furious and incensed that someone is yet again trying to profit from him. It's an incredibly distressing time for them."
Dr Conrad Murray denies the manslaughter charges and will go on trial later this year.
