Both Co-op's are community retailers with food businesses and also have travel and funeral interests.
United Co-operatives chief executive Peter Marks said of the proposal: 'Two strong societies coming together, from strength, for an even stronger future. That's the exciting vision behind the proposed merger between Sheffield Co-operative Society and United Co-operatives.'
Sheffield Co-operative Society has a turnover of£95 million and employs over 1,200 people. United Co-operatives has a turnover of£2.1 billion and a staff of 16,000.
The proposed merger will be presented to Sheffield Co-operative Society members at a special meeting in two weeks. This will be followed by a second, confirmatory, meeting on October 17. If members approve the proposal, it will take effect from late January next year.
Sheffield Co-operative Society chief executive Michael Howarth said: 'Being part of a larger, more diverse business would increase career opportunities for staff and, with the increased profits that the enlarged society would produce, would come the ability to support more investment.'