The two companies, which count billionaire Elon Musk as a major shareholder, are in the final stages of carrying out due diligence on each other, and could agree on the terms of a deal in the coming days, though it is still possible that their negotiations end unsuccessfully, the people said on Saturday.
It could not be learned whether SolarCity would be successful in including a go-shop provision in a merger agreement with Tesla that would allow it to continue to solicit bids from other potential buyers for a short period of time.
The sources asked not to be identified because the negotiations are confidential. Representatives for SolarCity and Tesla did not immediately respond to requests for comment.
Tesla announced last month that it had made an all-stock offer for SolarCity worth $2.8 billion. It argued that by acquiring SolarCity, the two companies would form a one-stop clean energy shop, offering consumers solar panels, home battery storage and electric cars under a single trusted brand.