If the investigating magistrates at the Law Court of the Republic (CJR) accept the recommendation, the investigation will be dropped, a source close to the case told AFP.
There was no immediate confirmation from the CJR, a special court established to try cases of ministerial misconduct.
And there was no immediate response from Lagarde's lawyer.
On August 27, the CJR formally opened an investigation into Lagarde on grounds of alleged "negligence".
The case dates back to 2008 when she decided to allow arbitration to end a dispute between controversial French tycoon Bernard Tapie and the Credit Lyonnais bank.
At the time, she was finance minister under the government of then president Nicolas Sarkozy.
The arbitration resulted in Tapie, who had close ties to Sarkozy, being awarded a 403-million-euro payout to settle his dispute with the bank.
Lagarde's handling of the case -- specifically her failure to challenge the award that was hugely beneficial to Tapie but prejudicial to the state -- has seen her placed under formal investigation for "negligence".
She has denied any wrongdoing.