Trulia's stock rose more than 14 percent in Monday premarket trading, while Zillow's stock fell more than 3 percent.
Trulia shareholders will receive 0.444 shares of Zillow common stock for each share they hold, and will own approximately 33 percent of the combined company. Zillow Inc. shareholders will receive one comparable share of the combined company and own the other two-thirds of the business.
The combined company will keep both the Trulia and Zillow brands.
The companies said that there is limited consumer overlap of their brands, as about half of Trulia.com's monthly visitors don't visit Zillow.com.
The deal will put Zillow and Trulia in a position to have a bigger share of digital real estate ads as more people use the Internet for house hunting and property agents use more of their money marketing online, according to Bloomberg. Zillow and Trulia are the top two most-visited property sites in the US tracked by ComSore Inc.
Zillow, which is based in Seattle, had 83 million unique users across mobile and online in June. San Francisco-based Trulia had 54 million unique users across its websites and mobile apps the same month.
Trulia Inc. CEO Pete Flint will stay in his post and join the board of the combined business. He will report to Zillow CEO Spencer Rascoff. Another Trulia director will join the combined company's board after the transaction is complete.
Both companies' boards approved the deal. Both companies' shareholders still must approve it. The transaction is targeted to close next year.