The Huffington Post has agreed to accept a $315m buyout from AOL.
The companies said about $300m of the sale price will be in cash, with the balance in AOL stock.
The Washington Post said this is a spectacular return for the Huffington Post, which was founded on a $1m investment less than six years ago.
The deal will put Huffington Post co-founder Arianna Huffington in charge of all AOL content and oversee every media group within AOL's network.
AOL is handing over the reins of its news segment - including TechCrunch and Endgadget - to Arianna Huffington, according to the New York Times.
The deal, a key part of AOL's plan to recover its position in the online market, will boost the company's content offerings and reach. The agreement will give AOL access to Huffington's writers and 20m unique visitors a month.
The emerging group is expected to show a combined base of 117m unique visitors a month in the US, and 270 million unique visitors from around the world.
AOL has been in decline, with overall revenue falling 26% in the last quarter of 2010 to $596m and advertising sales down 29% to $332m.
AOL management hopes the deal will help the online company turn around its struggling display advertising business.
The company had just a 5.3% share of the US display advertising revenue in 2010, down from 6.8% in 2009, according to eMarketer.
"The deal will create a next-generation American media company with a global reach that combines content, community and social experiences for consumers," AOL chief executive Tim Armstrong said.
The deal is expected to close late in the first quarter or early in the second quarter of 2011, pending regulatory approvals.