Four out of seven graveyards in the city have already reached full capacity – with more than 200 new full burial spaces needed each year.
With the available space reducing year on year, council chiefs are set to consider extending cemeteries.
Privately-owned ground next to Penn Cemetery, which has reached its maximum capacity, could be bought in a bid to tackle the issue.
Similar space near Danescourt Cemetery could also be purchased.
A report, which will be presented to councillors at a meeting on Thursday, said: “Grave space is reducing year on year and it is essential that due consideration is given to the sustainability of the service to ensure that new burial space is available, at a choice of cemetery, to all service users in the long-term future
“Consideration will need to be given to sustaining burial capacity for the future and new potential burial grounds within the city, will need to be identified and developed with appropriate funding being made available.”
Bushbury Cemetery and Crematorium was extended approximately 10 years ago – but some of the ground is not fit for purpose without extensive drainage, the report revealed.
The Underhill Lane site carries out roughly 2,800 cremations each year –making it the busiest individual crematorium in the West Midlands.
But council chiefs have warned that plans for a new private crematorium, between Essington and Bloxwich, could have a “detrimental effect” on income.
The report said: "This will undoubtedly influence the number of service users that use Bushbury Crematorium and therefore may have a detrimental effect on income from using the facility."
It was also "vitally important" the crematorium remained competitive, with it following new "indicatives and trends", the report added.