The company is said to be building test versions of the small crossover at its Kansas City assembly plant.
General Motors is reportedly making final preparations to begin building Cadillac's XT4.
The new crossover will add a critical third option in Cadillac's high-riding model lineup, slotting below the current XT5 in terms of size and price.
The company is currently building test versions of the XT4 at its Kansas City assembly plant, sources have told Bloomberg.
"It's a new architecture for us, and it is up to the task," Cadillac president Johan de Nysschen said in a statement. "It's the right size, dynamics and sophistication to attain what I believe is worthy of a Cadillac in this segment."
Spy shots suggest the smaller crossover will not stray far from the XT5's silhouette and styling. A turbocharged four-cylinder engine is expected to serve as the primary powerplant.
GM is also believed to be building a larger crossover to slot between the XT5 and Escalade.