AFP - The US spoke out against the prospect of an early release for the Lockerbie bomber Thursday after British media reported he will be freed on compassionate grounds next week due to his prostate cancer.

Ex Libyan agent Abdelbaset Ali Mohmet al-Megrahi will be released from his Scottish prison and return to his homeland in time for the Muslim holy month of Ramadan, the BBC and Sky News television said, without quoting sources.

Scotland's government insisted no decision on Megrahi's future had been taken, adding that Justice Secretary Kenny MacAskill is expected to announce what will happen later this month.

Meanwhile the United States -- many of whose citizens were among 270 killed when Pan Am flight 103 exploded over the Scottish village of Lockerbie in 1988 -- said he should serve out his whole sentence.

"We have made our views clear to the UK government, to other authorities, that we believe that he should spend the rest of his time in jail," said US State Department spokesman Philip Crowley.

Megrahi's wife Aisha told AFP she had been assured by Libyan authorities that he would be "freed soon". But she was not given a specific date and noted that rumours of his release had been circulating for a long time.

A spokeswoman said the Scottish government is considering two possible, separate options for Megrahi -- transferring him back to Libya to serve out the rest of his jail term and compassionate release, where he would be free to go.

Amid claim and counter-claim over the story, Oliver Miles, a former British ambassador to Libya, said the news may have been leaked to gauge public opinion.

"This is either a leak or a tip-off," he told BBC radio. "Perhaps the authorities are flying a kite to see what the reaction will be... the public reaction might well change the decision."

Whether true or not, the reports received a mixed reaction from victims' families.

Susan Cohen, whose daughter was killed in the bombing, told Sky News that Megrahi's release would be "a disgrace."

"This man is a mass murderer," she said. "I'm sick of hearing about compassion and sympathy. If the man is ill, he can get treatment in prison. If we send him back, he'll be a hero".

Among the relatives welcoming the reports were Briton Jim Swire, whose daughter Flora died. He told Sky it was "inhumane" to keep Megrahi in prison and it would be "to Scotland's credit" if he was returned home.

The Scottish government said last month it had received an application for him to be freed on compassionate grounds.

In May, Libya applied for him to be transferred to his homeland under a prisoner transfer treaty between Libya and Britain.

Megrahi also launched a second appeal against his conviction in April after losing an earlier appeal in 2002.

The 57-year-old was diagnosed with prostate cancer last year.

His lawyer says it has spread to other parts of his body and is at an advanced stage, while his wife told AFP earlier this year that he was "in danger of dying."

Megrahi was sentenced in 2001 by three Scottish judges sitting at an extraordinary tribunal in The Netherlands for blowing up Pan Am flight 103 on the night of December 21, 1988, shortly after it left London for New York.

The blast, Britain's deadliest terror attack, killed all 259 on board and 11 people on the ground due to falling debris. Many of those on the flight were Americans travelling home for the Christmas holidays.

Relations between Britain and Libya have warmed in recent years after Tripoli's renunciation of weapons of mass destruction in 2003.

Then-prime minister Tony Blair visited Libya in May 2007 and current premier Gordon Brown held talks with its leader Moamer Kadhafi at the G8 summit in Italy last month.