Lugo, a former Roman Catholic bishop who left the church to run for office, is due to travel to the Brazilian city of Sao Paolo next week for consultations on the course of further treatment.
His doctors said chemotherapy may be recommended to treat the cancer.
Lugo, 59, underwent surgery earlier this year to treat a swollen prostate.
The president has been under pressure recently at home over a spate of murders and kidnappings blamed on a small armed group operating out of the country's remote north.
His term as president is set to expire in 2013.