The Democratic Party and Alternattiva Demokratika intend to join forces and contest the next general election as one party.
PD acting leader Timothy Alden confirmed that talks were now at an “advanced stage” and that the process would now be opened up to public consultation.
“I had long argued for the consolidation of third party politics into the new movement the country needs,” Mr Alden wrote on Facebook.
“Alternattiva Demokratika felt the same.”
The PD leader urged people to give the parties their input, saying the new force had to be built by the grassroots and “including everyone”.
Malta's next general election must happen by 2022.
Mr Alden said the PD executive had agreed to pursue the strategy following a meeting held in late September, though tentative talks between both sides have been ongoing since at least January.
"We’re thinking it could be a matter of months," Mr Alden told Times of Malta.
"One of the things that has changed since last time is that we’ve built personal relationships and we’ve built trust. Naturally the more we got to know each other better we realized that what the country needed is a fresh movement," he said.
"This political crisis that we’re going through has been a long time coming. The two big parties have been in bed with big business from day one, so no matter who the people vote for, it doesn’t matter, because businessmen are calling all the shots, they’re getting stuck with the same system."
AD Chairman Carmel Cacopardo said that both parties had agreed on broad strokes in principle and were working together to move forward with the movement.
"The political system penalises small parties, so it doesn’t make sense for parties similar ideas to work against each other rather than together. The PD and ourselves have a lot of overlap in ideology and if we remain separate we would continue to penalize each other, Dr Cacopardo said.
Last February, Malta Today reported that the two parties had agreed to collaborate but could not reach agreement on a full-blown coalition deal.
The PD earned two seats in parliament during its maiden election in 2017, which it ran as part of a Forza Nazzjonali coalition with the Nationalist Party.
It was the first time since 1962 that a party other than the Labour and Nationalist parties was represented in parliament.
But both those elected parliamentarians – Marlene and Godfrey Farrugia – are no longer members of the PD and remain in parliament as independent MPs.
Adrian Delia quickly moved to dissolve the Forza Nazzjonali agreement within months of becoming Nationalist Party leader in 2017.
AD was founded in 1989 and candidates have run under its ticket in every general election since that of 1992. Although their presence helped push green issues onto the national agenda, they have yet to ever elect a member into parliament. In the 2017 general election they garnered just 0.8 per cent of the national vote.