The News Corp-owned newspaper said its parent firm was mulling offering some of its internet assets to Yahoo as part of a broader deal.
The Times said that News Corp would want a 25% stake in Yahoo in return for MySpace, which it bought for $580m.
Yahoo's direction is in question after chief executive Terry Semel quit.
MySpace could be a valuable tool in Yahoo's battle against internet search rival and market leader Google, analysts said.
'Tentative'
New chief executive Jerry Yang, who co-founded Yahoo, has pledged to revive the business but some analysts believe the firm is now a bid target.
The Times said discussions over MySpace and News Corp investing in Yahoo were tentative and may lead to nothing.
Yahoo is currently worth $37bn, meaning that News Corp would need to pay in the region of $12bn for a 25% stake.
News Corp has invested heavily in its own internet presence in recent years but a stake in Yahoo would give it influence over one of the world's leading internet businesses.
Despite seeing profits fall and losing market share to Google, Yahoo still has more than 500 million users around the world.