The proposed merger of the construction and maritime unions could create one of Australia’s biggest industrial bodies.
Officials from the Construction Forestry Mining and Energy Union and the Maritime Union of Australia's national council met in Sydney to begin formalising a merger.
A merger proposal will be taken to the MUA national conference in February.
The MUA has an estimated 16,000 members while the CFMEU's three divisions have a combined 110,000 members.
MUA national secretary Paddy Crumlin said a merger would create Australia's most powerful union and better serve members.
"This is a huge decision that hasn't been taken lightly," Mr Crumlin said in a statement.
"Discussions with the like-minded CFMEU will help us fight the ever-pervasive anti-worker and anti-union attacks on workers and their entitlements and job security."
The CFMEU's Michael O'Connor said his union would welcome a merger with the MUA.
"The move will be hugely beneficial to not just the members of the MUA and CFMEU but will lead the way for all working men and women," Mr O'Connor said.
Industry watchdog Fair Work Building and Construction flagged the possibility earlier this year of the CFMEU being deregistered over persistent "unlawful conduct" in the building industry.
Courts have issued $1.39 million in penalties in response to FWBC cases over the past financial year, of which $1.179 million is related to the CFMEU alone.
Industrial law expert Andrew Stewart said it was possible a merger and the creation of a new union could head off deregistration.
However, the University of Adelaide's Professor Stewart said if the federal and state governments were to press ahead with deregistration, they would probably use special legislation - as occurred with the Builders Labourers' Federation - rather than a court application.
Such legislation would allow governments to address the transfer of assets or an amalgamation and the creation of a new union under a different name.
Prof Stewart said it would be logical for the federal government to wait until the unions royal commission hands down its final report in December before taking any action.
He said he did not expect the merger to be the start of a trend in the union movement, as many had consolidated in the 1980s and '90s.
Australia's largest union is the Shop Distributive and Allied Employees' Union with about 230,000 members.