The Home Office will aim for a step change in a battle against the so-called "alt-right" movement on social media, according to The Times.
M&C Saatchi has been tasked with advising and supporting local groups to challenge far-right narratives, while no national campaign has been planned, Campaign has learnt.
An "insider" was quoted in The Times as saying the government would challenge "people who read Breitbart", the far-right American news outlet. The recently-elected US president Donald Trump appointed Breitbart founding member Steve Bannon as his chief strategist.
M&C Saatchi won a Home Office contract last year to produce up to ten campaigns a year to undermine extremism. The agency also made ads for the Conservative party during the most recent general election in 2015.
A Home Office spokeswoman said: "This government is determined to challenge extremism in all its forms including the evil of far right extremism and the terrible damage it can cause to individuals, families and communities.
"Tackling hatred and division is not something that can be done by government alone, it is communities that defeat extremism.
"That is why central to the counter-extremism strategy is working in partnership with and supporting local people and community groups who are challenging far right and extreme right wing narratives."