Sainsbury's has confirmed it is in "advanced discussions" over a possible merger with rival Asda worth up to £10 billion.
The highly expected talks over a deal would create a new supermarket giant larger than the market leader Tesco if it goes ahead.
It is not yet clear how the deal would be structured. One option is Sainsbury's absorbing Asda stores, while Walmart take a large stake in the combined group.
According to reports, both brands would be retained under any agreement.
A tie-up would also be likely to need approval from the UK competition watchdog, the Competition and Markets Authority.
A spokesman for J Sainsbury plc, said: Sainsbury's confirms that it and Walmart Inc. are in advanced discussions regarding a combination of the Sainsbury's and Asda businesses.
"A further announcement will be made at 7am on Monday 30 April."
The latest statistics show that Tesco has a 27.6% market share, while Sainsbury's has 15.8% and Asda has 15.6%. Together, they would move ahead of Tesco, with 31.4% of the market.
This would not be the first time Sainsbury's has acquired another high street giant. In April 2016, they announced a £1.4 billion takeover of Argos, which led to better than expected results the following Christmas.
The traditional high street has come under increasing pressure in recent years, with the growth in online retailers.
Sainsbury's and Asda have also been squeezed by the rise of lower-cost supermarkets Aldi and Lidl, who between them have a 12.6% grocery market share in the UK
Neither Asda nor Walmart could immediately be reached.