Tesco won provisional approval for its £3.7 billion takeover of UK wholesaler Booker from the UK competition regulator, moving the retailer closer to securing a new avenue of growth.
The Competition and Markets Authority (CMA) said it had conducted an in-depth review and provisionally concluded that Tesco's purchase of Booker does not raise competition concerns.
The provisional unconditional clearance will come as a major relief to Tesco.
Most analysts had expected that Tesco would have to agree store disposals to gain clearance.
Both Tesco and Booker, the country's biggest grocery wholesaler, welcomed the CMA announcement.
Tesco said it expected to complete the deal, which also requires shareholder approvals, in early 2018.
Analysts said, however, that they expect some uncertainty to remain, with the focus shifting to whether investors will approve the deal.
Their analysis indicates that Tesco will achieve the required 50% shareholder approval and that the focus will be on Booker, where the threshold is 75%.
The CMA said it found that Tesco as a retailer and Booker as a wholesaler supplying caterers and independent retailers Premier, Londis, Budgens and Family Shopper do not compete head-to-head in most of their activities.
In particular, it found that Tesco does not supply the catering sector that accounts for more than 30% of Booker's sales.
"Our investigation has found that existing competition is sufficiently strong in both the wholesale and retail grocery sectors to ensure that the merger between Tesco and Booker will not lead to higher prices or a reduced service for supermarket and convenience shoppers," said Simon Polito, chair of the CMA's inquiry group.
The CMA is now inviting further comment and evidence before making its final decision by the end of December.
The proposed deal is Tesco chief executive Dave Lewis's boldest move yet.
He believes it will provide a new source of growth by giving the group access to the fast-growing "out of home" food market, given Booker's role as a distributor to the catering industry.
Some Tesco shareholders have criticised the bid, saying Tesco is overpaying and that it will distract from the company's turnaround plan.
Rival wholesale groups have also called for the takeover to be blocked.