Pace said in his statement that the Joint Chiefs were continuing to review "a wide range of options on any issue."
"I take very seriously my duty to provide the best military advice to the president. I provide that advice privately to the president."
The Times cited administration and military officials in its report that Pace supported a steep reduction in troops.
"Had the US foreign policy makers read history, they would not get involved in any war after Vietnam"
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The article comes eight months after the Bush administration's "surge" policy committed 30,000 troops to Iraq.
Pace's alleged position may be in strong contrast with the view of other senior military officials.
"[Pace's] assessment could collide with one being prepared by the US commander in Iraq, Army General David Petraeus, calling for the US to maintain higher troop levels for 2008 and beyond," the newspaper said.
A White House spokesman said Bush had not received any recommendations on US troop levels in in Iraq.
"I would caution everyone that, between now and the next approximately 19 days, we're going to see a lot of reporting about what different people are recommending, [and] what they're not recommending," said Gordon Johndroe, national security spokesman.
He said that Bush would not make his own report to Congress after the submission of a report by Petraeus and Ryan Crocker, US ambassador to Iraq, which is due in September.
The Times said Pace and the Joint Chiefs are concerned that the Iraq war "has degraded the US military's ability to respond, if needed, to other threats, such as Iran."
It said the Joint Chiefs - senior generals and admirals who advise the president on military affairs - want to reduce the 20 combat brigades currently on the ground in Iraq by up to 10 brigades.
Such a reduction, together with support units, would take the US troop presence in Iraq below 100,000.
The White House and Petraeus are aiming to cut back to 15 brigades, for a presence of about 134,000 troops, the paper said.
With Petraeus' recommendation imminent, the Joint Chiefs' responsibility towards the military's well-being means Pace "by law, has a big role in that and he will provide his advice to the president," the newspaper quoted a senior military official as saying.
But given the pressure to defer to Petraeus' report, the Joint Chiefs could dilute their recommendations, the Times said.