The deal, which would allow Google ads to appear alongside Yahoo! search results, has been fiercely disputed by a number of advertising bodies and investigated by competition regulators in the US and Europe.
The US Department of Justice's decision to look into the deal caused the two companies to delay the agreement, which was originally struck in June.
The Journal reports that after meeting with the Department of Justice yesterday, Google and Yahoo! could decide to walk away from the deal by the middle of next week unless a last-minute deal is reached.
Spokespeople for the two companies insist that the discussions are ongoing.
Google spokesman Adam Kovacevich said: "We are confident that the arrangement is beneficial to competition, but we are not going to discuss the details of the process."
Yahoo! spokeswoman Tracy Schamler said: "We believe strongly that this agreement will strengthen Yahoo!'s competitive position in online advertising and will help to drive a more robust, higher quality Yahoo! marketplace for our advertisers, publishers and users."
The deal would bolster Yahoo!'s position in the market, as it fends off Microsoft, which made a bid for the company earlier in the year.
But advertisers are wary that the deal would strengthen Google's search advertising stranglehold, eliminating competition and cause prices to go up.
According to July 2008 comScore results, Google and Yahoo!'s combined search advertising business comprised 80% of the US market.