The plan is contained in the official Debt Sustainability Assessment of the country's financing needs, prepared by the European Commission, according to draft reports seen by Reuters and the Financial Times.
At current prices, 400 million euros worth of gold amounts to 10.36 tonnes of metal, representing just a small fraction of gold liquidated by gold exchange-traded funds since the beginning of the year, analysts said.
Cyprus' total bullion reserves stood at 13.9 tonnes at end-February, according to data from the World Gold Council.
Nicosia's plan to dispose of most of its gold holdings would also be the first such sale by a country seeking international assistance since the Asian financial crisis in 1997-98, when South Korea asked the public to donate jewellery to the central bank for the good of the nation.
"I think this could be a turning point," said Jonathan Spall, director of precious metals at Barclays Capital. "Central bank stocks of gold which had looked to be ring-fenced in the bailout process could now seemingly come in to play."
Matthew Turner, a metals analyst at Macquarie, told Reuters that it would be very bearish for the gold market if other countries like Spain and Italy with large gold reserves became sellers, but that there are good reasons to believe Cyprus is a special case.
Portugal holds 382.5 tonnes of gold, worth some 14.76 billion euros at current prices, in its reserves, while Spain's holdings stand at 281.6 tonnes, worth 10.8 billion. Italy is the world's fourth largest gold holder, with 2,451.8 tonnes of gold in its reserves, worth 94.6 billion euros.
The document also said that Cyprus would raise 10.6 billion euros from the winding down of Laiki Bank and imposing a haircut on Bank of Cyprus's large deposits.
The Cyprus government is also hoping to raise a further 600 million euros over three years from raising the corporate and capital gains tax rate.