The SDLP and Fianna Fáil are expected to announce a schedule for a closer working relationship and policy discussions on Thursday.
The matter was discussed at a Fianna Fáil party meeting on Tuesday evening.
It is understood senior SDLP figures are being briefed in advance of a further announcement on Thursday.
Fianna Fáil have downplayed suggestions of a merger or an alliance.
The party's Brexit spokesperson Lisa Chambers told BBC Radio Foyle: "We are not merging, it is a partnership.
"We will retain our distinct identities."
The parties are due to unveil a shared policy platform dealing with high level themes.
SDLP sources have also stressed what has been under discussion is a partnership rather than a merger.
At a meeting of the party's management committee on Tuesday night, leader Colum Eastwood briefed members and MLAs about the talks.
He told them there would not be a merger and that prospective candidates for the local government elections in Northern Ireland in May would still stand under the SDLP banner.
SDLP sources said party branches would be given more information on Wednesday and a special party conference would be held in mid-February to vote on the "formalised partnership".
In October last year, Fianna Fáil headquarters were at loggerheads with some senior members of the party after they appeared to announce a Fianna Fáil candidate in Northern Ireland.
At a meeting in Omagh, County Tyrone, it was announced that councillor Sorcha McAnespy would be standing as a candidate in Northern Ireland's local council elections.
But Fianna Fáil headquarters issued a statement reiterating that the party had made "no decision" on contesting the election.
Fianna Fáil Senator Mark Daly was at the event in Omagh and was named as Ms McAnespy's campaign manager.
He was subsequently sacked as the party's deputy Seanad (Irish senate) leader and spokesperson for foreign affairs.
Some SDLP members have previously said they would oppose any merger, including South Belfast MLA Claire Hanna, who told BBC News NI she would not join Fianna Fáil.