First Choice Holidays and TUI, which owns Thomson Holidays, have been given conditional clearance by the European Commission to merge.
Tui owns Thomson Holidays, Crystal Holidays and Simply Travel
The merged company will have to sell TUI's Irish business: Budget Travel.
The Commission ruled that the combination with First Choice's Falcon/JWT business would give the group too much of the Irish market.
The new firm, TUI Travel, will be listed in London and have 27 million customers and £12bn in annual sales.
The clearance followed the Commission's decision last month to allow Thomas Cook to buy the package holiday company MyTravel.
First Choice used to be called Owners Abroad and is based in Crawley in West Sussex.
TUI's Thomson Holidays has been the biggest UK tour operator since 1974.