Lincoln University and Crown Research Institute AgResearch are planning a merger.
The proposal was announced in Wellington on Tuesday.
The two organisations say their plan will create a world-class university focussing on New Zealand's primary industries.
Lincoln University Chancellor Tom Lambie says the merger would produce an entity which would rank in the world's top five of its type and would contribute $1 billion worth of added value to the farming community annually over 10 years.
AgResearch says it has already brought animal and plant sciences together and a merger with Lincoln will take all that knowledge and technology into education and training.
He says the move is not driven by a desire to cut costs.
Radio New Zealand's education correspondent reports both organisations say there is still a lot of planning and consultation to be done before it can recommend the merger to the Government.
They say the Government has reacted positively to the proposal.
Lincoln is the smallest university in New Zealand and AgResearch is the largest Crown Research Institute.