Builder Bovis Homes has rekindled talks over a merger with rival Galliford Try's housing arm in a deal valuing the division at £1.08 billion.
Bovis said the talks to combine Bovis Homes and Galliford's Linden Homes and Partnerships & Regeneration unit are still at an early stage, and stressed there remains "significant work to be completed" before a deal can be agreed.
They stressed the deal was not a full merger of the two companies, with Galliford remaining a separately listed construction-focused firm.
It marks the second attempt of a deal between the pair this year after Galliford Try rejected a £950 million approach in May, and comes two years after full merger talks between the two housebuilders collapsed.
Galliford attempted to acquire Bovis but talks broke down after the pair failed to agree on a valuation.
Bovis boss Greg Fitzgerald - a former chief executive of Galliford Try for nearly a decade - said he believed it was a "massive opportunity".
He said: "While discussions are still at early stages, this potential combination represents an exciting and transformational opportunity to create a leading UK housebuilder with enhanced scale."
He added: "Galliford Try's Partnerships business is a fantastic brand, with a very strong position in the UK.
"Combining it with Bovis Homes' newly launched Partnerships Housing Division would enable us to become the partner of choice for delivering more affordable homes at a time when these are needed the most."
The potential deal would see Bovis pay Galliford £300 million in cash, award shares worth £675 million to Galliford investors and take on £100 million worth of debt.
Bovis would also take on Galliford's pension schemes.
Following completion of the proposed deal, Galliford shareholders would own around 29.3% of the enlarged Bovis Homes group.
The deal would bring together two of the UK's top 10 housebuilders, although Bovis is by far the larger of the two.
Graham Prothero, chief executive of Galliford Try, said: "The transaction is an exciting opportunity to create two strategically focused businesses.
"The significant cash element within the consideration provides a firm foundation for our newly reorganised Construction business to flourish as an independent company."