Talks are taking place to resolve a long-standing row over the future of a former brewery site in Sunderland.
The riverside site has stood empty since 1999
Tesco bought the former Vaux brewery site in 2001, but has seen three attempts to build a superstore blocked.
The company recently began a legal challenge to the rules which have scuppered its proposals.
Now city regeneration company Sunderland Arc said it has begun talks over the possible purchase of the site to develop homes and offices.
Tesco wants a mix of shops and homes on the site, but has been blocked by Sunderland Council's rules, which prevent any retail developments.
Sunderland Arc, together with One NorthEast, English Partnerships and Sunderland Council, has begun talks with the supermarket giant in an effort to buy the site.
Sunderland Arc plans a scheme comprising up to 1,000 new homes, 47,000 sq metres of offices, two new hotels and civic buildings, creating more than 3,000 jobs.
The proposals were approved at a recent public inquiry.
David Walker, chief executive of Sunderland Arc, said: "Now that we have backing at local and national level, we are in a prime position to begin a formal negotiation process with Tesco over acquiring the land.
"We are keen to see a quality supermarket in Sunderland, but do not believe that Vaux is the right site.
"We hope we can still encourage Tesco to invest in the city on a more appropriate location."
Tesco said the Vaux site had the potential to be a "world-class project" including public spaces, houses, offices, restaurants as well as a superstore.