The bidding process will officially begin on Friday evening and comes to end on the following day, the U.K.'s Takeover Panel said Thursday, with a maximum of three rounds to decide the fate of the deal. Each bid must be made in cash.
In the first round, the company with the lowest bid — in this case Fox — can make an increased bid for Sky. Comcast then has the chance to increase its bid for Sky in the following round. If the auction procedure has not been concluded during that second round, it is then carried on into a third and final round.
Sky, Fox, Comcast and Disney agreed to an auction to settle the bidding war over the British broadcaster, the panel said.
Disney, which has agreed to buy assets of Fox, could gain control over Sky if Fox comes out of the auction process victorious.
In such auctions, bidders submit secret offers to a third-party arbiter. And while this method is relatively common for commercial transactions, it is extremely unusual when it comes to deal-making for such a high-profile public company.
Sky is currently valued at £27 billion, which translates to more than $35 billion. The firm's share price was marginally lower on the news.
"For now, Comcast seems to be in pole position, but it's not a slam dunk," Paolo Pescatore, a tech, media and telecoms analyst, told CNBC via email.
"There's so much to play for and expect both companies to open up the war chest. This represents a great opportunity to own a prized asset which will prove to be a worthy long term investment."
In what has been a drawn-out bidding war between some of America's biggest media companies, Britain's Sky has found itself at the center.
The company is seen as a coveted asset in the entertainment industry due to being a major player in the U.K.'s pay-TV scene, as well as the digital media sphere.
A takeover deal would also come on the heels of Sky's foray into the gaming market, with the telecommunications firm set to develop games based on its TV shows following a deal with Skybound Entertainment, the firm behind "The Walking Dead."
It has been a tense battle among the U.S. giants, with bids being thrown left right and center with the aim of expanding reach both within the industry and into an overseas market.
Prior to the news, offers for Sky stood at $34 billion from Comcast and $32.5 billion from Fox.
Fox already has a 39 percent stake in Sky. The company had originally reached a deal in December 2016 to buy the part of Sky it does not already own.
The bidding war was complicated in July after Comcast dropped out of a bid to buy assets of Fox, conceding defeat in a separate bidding war with Disney.
Fox, controlled by the influential Murdoch family, had been under the lense of U.K. regulators and politicians over concerns a takeover could extend too much influence to the Murdochs.
CNBC's Sam Meredith contributed to this report.