The Financial Times reported that sources said it was unclear how much Spotify would pay for the Berlin-based streaming company, and warned that the discussions could still collapse.
Twitter recently bought a stake in Soundcloud with a $70m (£54m) investment. And in May this year, Soundcloud's co-founder and tech chief told City A.M. that the company was not worried about competition from the likes of Spotify or Apple Music.
"If we look at the space, there are few players in it, and I think the key really is differentiation. I think it's great for streaming overall."
Meanwhile, Swedish firm Spotify has already taken action to ward off Apple's grab for market share in the streaming space - earlier this year it snapped up two startups, New York-based voice messaging firm Cord Project, and Dublin-based music discovery service Soundwave.
Spotify declined to comment.