Attributing to a person familiar with the matter, the Wall Street Journal reported, "Yammer Inc agreed to sell itself to Microsoft Corp for USD 1.2 billion."
However, it was unclear when the acquisition would be completed and announced, the report added.
According to the publication, representatives of Yammer and Microsoft declined to comment on the deal.
Yammer-developed networks allow a company's employees to communicate and collaborate in a similar fashion the way Facebook works with friends.
The report said that purchase of Yammer could add more social features to Microsoft's Office software suite. The Office division regularly generates more than half of Microsoft's annual operating income.
The four-year-old Yammer, which has four million corporate users, has raised about USD 142 million from venture-capital investors.