Yahoo! did not immediately return calls for confirmation to the Wall Street Journal report, but CEO Marissa Mayer has scheduled a news conference in New York tomorrow at which the company said it will unveil "something special."
Reports last week said Yahoo! is eyeing the move to attract more users from the key 18- to 24-year-old age bracket, and that the internet pioneer sees the fast-growing Tumblr as one of the "coolest" sites with young internet users.
Yahoo! has been looking at a range of acquisitions since Mayer took over as chief executive last year and vowed to revive the company, which has faded in the face of competition from Google.
Founded in 2007 and headquartered in New York, Tumblr says it has more than 107 million blogs, 50 billion postings in 12 languages and 175 employees.
The website ranking site Alexa lists Tumblr as number 32 in terms of global popularity.
If the acquisition takes place, it would be the biggest for Yahoo! under Mayer and come in the wake of other pricey deals for startups, such as Facebook's acquisition of the photo app Instagram for stock worth USD 1 billion at the time.