Hasbro had approached Mattel at least twice before, first in 1996 and then again sometime in late 2015, according to media reports.
El Segundo, California-based Mattel is the maker of iconic Barbie dolls, American Girl dolls, Fisher-Price and Hot Wheels toys.
Mattel's shares jumped 20 per cent in after hours trading, while Hasbro rose 2.2 per cent.
Hasbro's approach to Mattel was made recently, one of the people said.
USA toymaker Hasbro Inc has made a takeover approach for rival Mattel Inc, the Wall Street Journal reported on Friday, citing people familiar with the matter. Hasbro shares were up 3.3%. But Mattel's shares are down by almost half this year alone - an appealing discount for Hasbro.
Mattel's market value is $5 billion after the stock plunged 47% so far this year. Mattel has also blamed the bankruptcy of toy retailer Toys "R" Us for its weak sales. The terms of a potential deal could not be learned, the newspaper added, cautioning there could be no deal. Mattel's stock fell to its lowest since 2009 that day. More than two decades ago, Mattel sought to take over Hasbro, but Hasbro rejected that hostile bid, saying the merger would never pass antitrust hurdles.
Hasbro is attempting to diversify revenue streams, and has sought to acquire movie studio and entertainment business Lions Gate Entertainment, but the talks were ended without any deal coming to fruition.