Nissan Motor, Japan's third-biggest automaker, is set to supply Chrysler with fuel-efficient small cars, Japanese broadcaster NHK reported on Thursday.
The two companies are in the final stages of negotiations on a deal for Nissan to supply Chrysler with a model with an engine displacement of around 1.8 litres, it said on its website.
Nissan and Chrysler, which was acquired this year by Cerberus Capital Management, are in talks to supply cars, trucks and engines to each other, a source said last month.
Nissan spokeswoman said negotiations with Chrysler are still ongoing and nothing has been decided.
Both Nissan and Chrysler have similar original equipment manufacturing (OEM) deals with other carmakers aimed at saving development costs in an increasingly competitive industry.
Over a year ago, Nissan and its French partner Renault broke off talks with General Motors over a comprehensive three-way alliance.
While Nissan-Renault Chief Executive Carlos Ghosn has said the alliance could still seek a U.S. partner in future, the discussions with Chrysler are on a smaller, product-by-product level, the source said.