Google and San Mateo-based YouTube are at a sensitive stage in the discussion, The Wall Street Journal and The New York Times reported on their websites today.
The blog TechCrunch had reported on rumours of the acquisition talks. Google and YouTube officials declined to comment.
Analysts said a Google acquisition of YouTube would make sense for both companies, especially considering Google's US$10 billion (A$13.4 billion) cash on hand.
"It's damn cheap for a company that already has a global presence," said Trip Chowdhry, an analyst with the San Francisco-based Global Equities Research. "YouTube's brand identity is no less than Google's and is no less than Coke's."
As YouTube's popularity continues to soar, she said, Google can help make sure the site's infrastructure can keep pace.
The acquisition would also immediately propel Google to the top of the online video heap. YouTube eclipsed traffic on Google's video site in February.
By July, the number of monthly visitors had grown to about 30.5 million, compared with 9.3 million for Google Video and 5.3 million for Yahoo Inc.'s Yahoo Video, according to Nielsen/NetRatings.
YouTube users watch more that 100 million videos daily.
Google's video service lets everyday users post clips, too, and unlike YouTube, Google also gives them the choice of selling video. All YouTube clips are free.
YouTube was founded in February, 2005, by three former employees of eBay Inc.'s PayPal electronic-payment unit. Its chief financial backer is the Silicon Valley venture capital firm Sequoia Capital, which has invested US$11.5 million (A$15.45 million). Sequoia was an early Google investor, too.
The 25-employee YouTube is surging thanks to the increased availability of high-speed internet connections and gadgets such as camera phones and digital cameras capable of taking video.
Most YouTube offerings are short amateur clips, although professional filmmakers, television networks and even political campaigns have posted materials.
Shares in Google rose US$8.69 (A$11.68), or more than two percent, to close at US$420.50 (A$565.07) Friday on the Nasdaq Stock Market.