Talks have been going on "for some time," said Martin Locher, an employee representative on TUIfly's supervisory board, at a Frankfurt press conference.
TUIfly was in discussions with EasyJet as well as "another airline in a European country outside Germany" about a possible takeover, he went on.
German business weekly Manager Magazin reported on Thursday that EasyJet was eyeing TUIfly - currently a subsidiary of leading tour operator TUI - as a takeover target as it looks for ways to soften any potential Brexit fallout.
EasyJet chief executive Carolyn McCall had ruled out takeovers just a few months ago, Manager Magazin reported, but with post-Brexit uncertainty looming she "wants to avoid a big risk for the firm with the surprising U-turn".
EasyJet already became the first UK carrier to activate a contingency plan after the June 23 vote to leave the EU, when it announced in July it had applied for an air operator certificate (AOC) to continue operating routes throughout the bloc.
Acquiring TUIfly could allow British-based Easyjet to secure a foothold in the EU and escape ill effects as the United Kingdom quits the economic bloc.
As an EU member, British airlines have until now been covered by the EU's Single European Sky system, which lifts trade restrictions on airlines with their headquarters inside the 28-member union.
Beyond escaping Brexit, adding TUIfly's network and 41 aircraft to EasyJet could allow the British carrier to build on its lines in Germany and mainland Europe.