Saab Automobile reached an agreement with Bayerische Motoren Werke AG that will let the Swedish automaker use BMW engines.
Initially, Saab will buy BMW engines for its 9-3 model, which is due to be launched late 2012, Bloomberg News reported without naming its sources.
Spyker Cars NV, the Dutch company that owns Saab, said it "confirms that talks are ongoing and will give further details once a final agreement has been reached."
The carmakers will announce the pact later this week, Bloomberg News said.
Saab also hopes to reach an agreement that will let it buy diesel engines from BMW, as well as using BMW's Mini Countryman platform for its 9-2 model.