Party delegates of the right-wing National Democratic Party agreed by a clear majority to combine forces with the like-minded German People's Union. In previous state elections, the two parties split the far-right vote.
Both parties are know to attract the votes of neo-Nazis
Out of 207 delegates, 194 voted in favor of a merger with the German People's Union (DVU), a National Democratic Party (NDP) spokesman said from the conference in Hohenmoelsen, Saxony-Anhalt, on Saturday.
The chances of the merger going ahead now depend partly upon the DVU, the smaller of the two parties, voting in favor of the move in a conference at the end of the month. A ballot of all members of both parties would then have to take place.
Both parties fell short of the vote share needed for seats in the national parliament
Under current plans, the new party would be called "NPD - the People's Union."
The parties together gained 1.5 percent of the vote nationally in the 2009 general election, keeping them well below the 5 percent threshold for national parliamentary representation.
While the NDP holds seats in two of Germany's 16 state parliaments, the DVU has no seats.
In recent years, both parties have faced financial problems and dwindling membership numbers. Federal agencies that monitor right-wing groups estimated that the NPD had some 6,800 members at the end of 2009, with the DVU having about 4,000.
Protest outside meeting
As the conference took place, around 400 people protested outside against right-wing extremism.
Boehmer warned of the dangers of far-right extremism
A tribunal on Friday in the city of Magdeburg gave approval for the conference to be held in Hohenmoelsen, despite objections from the town itself.
Both parties are known to attract votes from neo-Nazis and opponents have called for them to be banned, arguing that they are hostile to democracy.
Leading the protest was Saxony-Anhalt Premier Wolfgang Boehmer, who addressed the crowd.
"We have already gambled democracy away once before in Germany," Boehmer said. "That must never be allowed to happen again."
Author: Richard Connor (AP, dpa)
Editor: Sean Sinico