Federal prosecutor Madison Smyser disclosed the plea offer and Combs' rejection at a hearing in Manhattan federal court on Friday, shortly after Combs' lawyer Marc Agnifilo spoke in his client's defence. Smyser did not provide details about the offer.
Combs, 55, has pleaded not guilty to charges including racketeering conspiracy and sex trafficking for allegedly coercing women to participate in elaborate sexual performances known as "Freak Offs" with male sex workers.
The rapper and Bad Boy Records founder has argued that the sexual activity described by prosecutors was consensual.
At a hearing before US District Judge Arun Subramanian in Manhattan, Agnifilo said Combs' belief that it was not inappropriate to have multiple partners or hire escorts showed he never intended to commit crimes.
"It's relevant to the defendant's intent that there's a lifestyle called swingers, call it whatever you will, that he was in, that he might have thought was appropriate," Agnifilo said.
"Part of the reason people think it's appropriate is because it's common."
Another prosecutor, Maureen Comey, urged the judge to bar Combs from offering evidence about other prominent people unrelated to his case who had hired escorts. Agnifilo said the defence would not do that, but was entitled to establish that the alleged bad behaviour was "part of a lifestyle."
The trial is expected to last eight to 10 weeks.
Jury selection begins on May 5, with opening statements scheduled for May 12.
Also known during his career as Puff Daddy and P Diddy, Combs is credited with helping turn rappers and R&B singers such as Mary J Blige, Faith Evans, Notorious B.I.G. and Usher into stars in the 1990s and 2000s.
But prosecutors have said his success concealed a dark side. They say he used threats of physical violence and cutting off financial support to coerce women into the "Freak Offs."
Prosecutors say the performances were often days-long, drug-fueled events during which Combs would sometimes record and masturbate. Smyser said jurors would see videos of some encounters.
Combs has been jailed in Brooklyn since September. He faces the possibility of decades in prison if convicted.
