The IOC's executive board met this morning amid mounting pressure for the Games to be delayed because of the coronavirus pandemic affecting large parts of the planet.
Cancellation is "not on the agenda", said the IOC, but a 'scaled-down' Games will be considered.
However, postponement is thought to be the most likely outcome.
The Games are under threat British Olympic Association chairman Sir Hugh Robertson said: "We welcome the IOC executive board decision to review the options in respect of a postponement of the Tokyo 2020 Olympic Games.
"However, we urge rapid decision-making for the sake of athletes who still face significant uncertainty.
"Restrictions now in place have removed the ability of athletes to compete on a level playing field and it simply does not seem appropriate to continue on the present course towards the Olympic Games in the current environment."
IOC president Thomas Bach said on Friday that "different scenarios" for the Games were being considered for the first time.
On Saturday, USA Track and Field, athletics' US governing body, called for the Olympics to be delayed.
It follows a request from USA Swimming for it to be delayed by 12 months.
UK Athletics chairman Nic Coward has suggested that the Olympics should be postponed, while Brazil, Norway and Slovenia's Olympic committees have also urged the IOC to take action and put the Games back to next year.
Four-time Olympic champion and BBC Sport pundit Michael Johnson has expressed fears that athletes could "risk their lives" trying to train for the Games and asked for clarity on the IOC's decision-making process.