The move comes amid a nuclear proliferation scandal centred around neighbouring Pakistan.
The Indian Express said the government may bar scientists from taking jobs abroad for five years after leaving sensitive posts in India.
The newspaper said New Delhi was concerned by the large number of former employees from state-run weapons and space programmes who were working in Libya.
The Indian embassy in Tripoli investigated and confirmed "quite a few" Indian scientists were working on Libyan projects, possibly in "high-technology" projects, the newspaper said.
But it said Libya has told Indian officials that all the projects were of civilian nature, said the newspaper, which did not specify its sources.
Libya struck a deal with the United States and Britain on December 19 to dismantle its programmes to develop weapons of mass destruction, handing over blueprints for making atomic weapons.
The report comes amid heightened concern about weapons
proliferation after Abdul Qadeer Khan, the architect of Pakistan's nuclear arsenal, admitted leaking secrets to Iran, North Korea and Libya.
India declared itself a nuclear power in 1998, a move followed within days by rival Pakistan.
Condemned around the world for going nuclear, India has stressed that it strictly opposes weapons proliferation.
In October, Indian authorities detained the head of a private company accused of exporting weapons-grade chemicals to Saddam Hussein's Iraq between 1999 and 2001.
The United States and India announced a deal last month to deepen bilateral cooperation on civilian nuclear and space activities and high-technology trade after negotiations that focused on non-proliferation.