The official did not want to be named because he fears reprisals.
The refugees are currently living in Bangladeshi camps, but under a new government directive they may be moved to Thengar Char Island.
It's about 30,000 hectares in size, more than 37 miles from the mainland, officially uninhabited and mostly flooded during heavy rain or monsoon season, District Forest Officer Amir Hossain Chowdhury told CNN.
Mangrove trees have been planted on about a third of the island, Chowdhury added, as part of an ongoing development plan. The trees are designed to shore up the land, to make it more inhabitable.
More than 69,000 people, many Muslim Rohingyas, have fled into Bangladesh from Myanmar since violence broke out in the Rakhine State
in October 2016, according to the United Nations.
Myanmar's Rohingyas are considered among the most persecuted people in the world
and are not recognized by the country they live in.
'It would be like ... exile'
The government official, speaking on condition of anonymity, told CNN the island was "barely accessible for most times of the year."
"This is a terrible and crazy idea ... it would be like sending thousands of people to exile rather than calling it relocation," the official said.
"The land is mostly unstable. Almost 500 acres of land has been eroded in the last couple of years. It will need at least another decade to shore up land and steady it."
The official also claimed the land was swarming with local pirates who would be reluctant to leave.
CNN reached out to the Bangladeshi government, and the foreign secretary said he could not comment. Calls to other officials were not returned.
In the directive, the Bangladeshi government said "both registered and unregistered" refugees would be sent to the island, more than nine hours travel from the refugee camps, before their eventual repatriation to Myanmar.
In total, 92,000 people have fled Myanmar's Rakhine State since a brutal police crackdown led to reports of rape, arson and other human rights abuses
CNN has not been able to confirm the reports due to tight access restrictions by Myanmar's government. The government denies the claims.