Under the terms of a deal, Newsday would be part of a joint venture with the New York Post and other News Corp assets, The Wall Street Journal reported.
News Corp would own most of the company and Tribune would keep less than 5 per cent.
Selling the paper would be key to the plans of Sam Zell, the Tribune chief executive and Chicago real estate magnate, to help slash debt at the company, which he took private in an $US8.2 billion buyout last year.
The Newsday deal is expected to wipe out as much as $US50million in annual losses that News Corp now incurs on the Post, with the combined Newsday and Post operation earning roughly $US50 million a year, one person familiar with the situation reportedly said.
Regulatory issues could slow the sale, particularly media ownership issues that could restrict the number of properties that News Corp could own in the New York area.
An announcement of a deal could be some time away.
Other parties to express interest in Newsday include Mortimer Zuckerman, who owns the Post’s rival, the New York Daily News, and Cablevision Systems Corp, the Wall Street Journal reported. Reuters has previously reported that Mr Zuckerman had bid on Newsday.
The pending agreement was fashioned largely by Mr Murdoch, Mr Zell and a senior banker, the Journal reported, adding that it was believed that Mr Murdoch and Mr Zell met directly several times during negotiations.
The structure of the deal is in part designed to meet Tribune’s demand that it be as tax-efficient as possible, with Tribune getting cash from the deal by guaranteeing debt raised by the joint venture, the Journal reported.
In addition to its stake, it is believed that Tribune will receive $US540 million to $US560million in cash.
As part of the agreement, News Corp would not be able to unwind the joint venture for at least 11 years, the Journal said.
Tribune officials declined to comment.