Zillow would also become the king of real estate listings available on smartphones.
"It's a very sound business move by Zillow, they wiped out their closest competitor," said Benchmark analyst Daniel Kurnos. According to Benchmark estimates Zillow and Trulia are No. 1 and 2 in the online real estate market, followed by No. 3 Move Inc.
Investors weren't so sure. Trulia's stock rose 8 percent in morning trading, but Zillow's fell 5.9 percent.
Zillow is known for its "Zestimate" housing price estimate, and both Zillow and Trulia offer similar information like neighborhood school and crime reports and payment calculators.
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.
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.
Shares of Zillow fell $8.28, or 5.2 percent, to $150.58 in morning trading. Shares of Trulia rose $4.46, or 7.9 percent, to $60.81 during midday trading.