The deal comes after the failure of Star's joint venture with Ekta Kapur-controlled Balaji Telefilms to operate regional channels last April to get off the ground.
Asianet operates three Malayalam television channels -- Asianet, Asianet Plus and Asianet News. Last year the company launched a Kannada channel Asianet Suvarna.
Confirming the negotiations, sources at Star said the broadcaster will hold a majority stake in the joint venture.
As part of the deal, the Malayalam entertainment channel will come under the joint venture, but it is not clear whether the news channel will be a part of the joint venture.
When contacted, a Star India spokesperson said: "We do not comment on speculation. Our relationship with Balaji continues to be strong".
Balaji produces many key prime time soap operas for the channel which include blockbusters like Kyunki Saas Bhi Kabhi Bahu Thi and Kasauti Zindigi Ki, among others. Even R Karthik, CEO, Balaji Telefilms, declined to comment on the issue. Asianet MD K Madhavan did not reply to a query.
Sources added that Star is looking at leveraging Asianet's strong regional presence and its distribution network (it reaches out to around 60 countries across the globe).
Star has wanted to foray into regional TV for a while now and has a Tamil channel, Star Vijay. Its 51:49 joint venture with Balaji was set up to launch general entertainment channels in Telugu, Kannada and Malayalam in two to three years. Balaji would produce exclusive content for these channels.
Sources said the Balaji agreement will have to be terminated before Star signs with Asianet because under the terms of the former neither signatory can form a joint venture with a third party.