England's Telegraph newspaper reported that Te'o will be on the trip, after Lions assistant coaches Steve Borthwick and Rob Howley watched in the stands, as he helped Worcester defeat Bath last weekend.
Te'o and Williams both play at inside centre.
Williams is expected to start at No 12 for the All Blacks during the series.
League fans will still remember Te'o's shoulder charge of Williams during the Rabbitohs match against the Roosters in 2014.
Both men quit league after that season, with Williams returning to the All Blacks, while Te'o joined Irish club Leinster.
In late 2015, Te'o moved to Worcester and by June last year, England coach Eddie Jones picked him for the tour of Australia.
But Te'o did not play a game against the Wallabies and had to wait until last November to make his test debut against South Africa.
He came off the bench, as England defeated the Wallabies in December and was a part of their Six Nations-winning campaign this year.
However, he was a secondary midfield option, with Owen Farrell the first-choice inside centre.
With only five midfield players to be selected for the Lions, it would be a bold move by Gatland to select Te'o, given he is not a first-choice starter for his country and he would inevitably take a spot ahead of others who are regular starters.
Te'o was born in New Zealand, but played a league test for Samoa and seven State of Origin games for Queensland.
The Lions tour once every four years and many great northern hemisphere players never made a trip.
Gatland was in charge of the Lions in 2013, when they defeated the Wallabies 2-1, a series result that ultimately led to the sacking of Australia's coach Robbie Deans.
But the Lions have not won a series against the All Blacks since 1971, with their last visit in 2005 resulting in a humiliating 3-0 whitewash.
