Lufthansa Chairman and CEO Carsten Spohr said the giant would sign the deal, which would mean the acquisition of parts of Air Berlin, including 81 aircraft and 3,000 employees, for a price tag of 1.5 billion euros ($1.78 billion), Efe news reported.
While Air Berlin and Lufthansa's low-priced branch Eurowings are the only carriers serving routes such as between Munich and Cologne, Spohr said the deal won't mean rising prices as competition "will intensify in Europe and worldwide".
Spohr said, "Today is a big day, which we will seal in a few hours with a signature".
Air Berlin filed for insolvency in August, after main shareholder Etihad refused to provide further financial support.
Investors believe that Lufthansa will profit from the debt-laden Air Berlin's breakup, driving up shares in the Cologne-based group by 2.4 percent, to 25.6 euros, on the Frankfurt bourse even before Spohr's announcement.
It had been in talks for weeks with Lufthansa and easyJet about selling parts of its business.
A person familiar with the matter said on Wednesday that Lufthansa, Germany's largest airline, was set to buy Air Berlin's Austrian leisure travel airline Niki, its LG Walter regional airline and also acquire some additional short-haul aircraft.
Spohr told the Rheinischen Post he did not believe Lufthansa's deal with Air Berlin would result in higher airfares.
Air Berlin, Germany's second largest carrier, will cease operating flights this month, capping a turbulent summer for European carriers.