A more compact version of the PS2 is understood to be ready to launch in 2008, shrinking the dimensions of the device even further.
Sony has already come out with a smaller PS2, as it did with the PSOne, but the forthcoming unit would see the power supply built into the console.
More efficient manufacturing is likely to make the new PS2 cheaper, at around $99 in the US and £75 in the UK.
It is thought that the new unit could compete more effectively with Nintendo's cheaply priced Wii, against which the PS3 struggles partly because of its high cost.
The PS2 is already the biggest selling gaming console of all time, having sold around 120 million units. Some 160 new games titles are due for release in the coming months.
Sony developing even smaller PS2
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