Although currently negotiating a deal to takeover General Motors Europe, PSA has confirmed it is talking to Proton over a move and is reportedly ready to invest and build a new plant in Malaysia.
A spokesperson for PSA said: "We are in the process of negotiation and have no further comments to add at this time."
Chinese manufacturer Geely, which owns Volvo, is also interested in purchasing Proton but may be offered a deal to take only Lotus. Those terms could suit PSA, which has less interest in the Lotus brand.
Proton is looking to get a foreign partner involved in the business after being bailed out by the Chinese government six months ago following a long period of poor financial results.