Paddy Power owner Flutter Entertainment has confirmed that the Australian Competition and Consumer Commission has given informal approval for its proposed combination with The Stars Group.
But the company said the proposed deal remains subject to approval by the Australian Foreign Investment Review Board as well as further international regulatory bodies.
The approval from the Australian watchdog is seen as a milestone in the group's attempts to merge with its Canadian rival to create what is expected to be one of the world's biggest betting businesses.
Alongside the UK, Australia was identified as a jurisdiction where the business combination was expected to meet obstacles.
The deal was first announced in October.
Following the proposed merger, shareholders of Flutter would own about 54.64% of the new company, with TSG shareholders owning about 45.36% of it.
The merger is expected to deliver pretax cost synergies of £140m a year, along with opportunities to cross-sell products to one another's customers in international markets and lower finance costs, the two companies said in October.
The merged group will be boosted by a partnership in the US with FOX Sports, which will have the right to acquire an 18.5% stake in Flutter's FanDuel US business from 2021.
Dublin-based Flutter merged its US business with fantasy sports company FanDuel last year in a deal it said would create the industry's largest online business in the US.
TSG had bolstered its British operations last year when it bought Sky Betting & Gaming in a $4.7 billion deal.
Flutter has sharpened its focus on North America as the potentially huge US market opens up and it faces higher taxes and increased regulations in its main Irish, UK and Australian markets.
Betting exchange Betfair and Paddy Power, which runs betting shops as well as an online business, merged in 2016 amid a flurry of consolidation in the sector.
The combined group will serve customers in more than 100 countries.
Around half of its current income is generated in Britain and Ireland, with 15% in Australia, 5% in the US and 31% from the rest of the world.
Paddy Power first opened for business with 42 shops in Ireland in 1988, formed from the merger of three smaller bookmaker chains.
