According to the Financial Times, an agreement is expected to be unveiled this week, which would vault Carphone Warehouse ahead of Virgin Media to the UK's second largest broadband provider after BT.
Carphone Warehouse declined to comment on the offer and Tiscali said it was "engaged in discussions for the disposal of its assets in the UK" without further detail.
Tiscali has been looking to sell its UK assets since last year, rejecting a £550m offer from Carphone Warehouse in May 2008.
An initial valuation of £1.3bn was quickly whittled away by the deteriorating economy, steady losses in its 1.8m UK customer base, and Tiscali's declining share price.
In December, BSkyB, which also expressed interest in the company, scaled back its £450m bid and eventually walked away from the offer in April.
Vodafone, BT, Swisscom and Italian mobile network Wind have also considered buying Tiscali's UK business.
Tiscali is struggling under a €600m debt pile and reported a €243m net loss in 2008.