Both gadgets will be powered by Google's own Android operating system. The WSJ cites people familiar with the matter.
By creating its own video game console and smartwatch Google is trying to get ahead of Apple who is rumored to release a smartwatch in the near future.
The news of Google developing a gaming console comes just as popular Android-based console Ouya launched earlier this week. The tiny system retails for $99 and has been well received so far.
The Android App Store, Google Play, had a rocky start but is now its filled with over 700,000 apps. Many of them popular games.
Both Apple and Google spokespersons declined to comment to the WSJ.
Google's move is reactionary. Apple is rumored to launch a videogame console as part of its next Apple TV product release. Google developing a console of its own would help it stay on pace with the iPhone-maker.
In addition to the two new products, Google is also working on a second version of its failed home media center, the Nexus Q.
A release of a console and smartwatch would come just as Google wraps up the next big release of the Android OS.
We'll continue to follow this story as it develops and make sure to bring your the latest updates.
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