Jingye Group confirmed it has begun negotiations with the loss-making steel firm, which has been kept afloat by the United Kingdom government since it collapsed into administration in May.
Its main plant is in Scunthorpe and Teesside, where it employs an estimated 4,000 people, but thousands more at other firms are reliant on the supply chain.
Director general of the UK Steel lobby group, Gareth Stace, told BBC Radio Four that the Jingye deal was "welcome", and will preserve a "significant asset" to the UK.
British Steel has rescued by Chinese firm Jingye potentially saving up to 4,000 jobs, the Insolvency Service has said.More news: Hong Kong police investigate after video of man being set alight surfaces
The government will be on hand to assist with loan guarantees and additional support to help the deal over the line, having kept the stricken business running since May through the Official Receiver after it was put into compulsory liquidation.
"The business will continue to trade as normal during the period between exchange and completion".
Jingye has 23,500 employees and as well as its main steel and iron making businesses, it is also involved in hotels, tourism and property.
The Chinese group is aiming to increase production at Scunthorpe from 2.5 million tonnes each year to more than 3 million, according to the Financial Times.More news: Manchester United played best game of season against Brighton - Solskjaer
The UK steel industry has struggled for several years amid claims that China has flooded the market with cheap products.
"However, due diligence on this sale was completed very quickly and the devil will be in the detail".
Nic Dakin, the Labour candidate for Scunthorpe, said: "The workforce at British Steel have done an outstanding job continuing to make and sell steel through this hard few months".
The deal could be announced by the Official Receiver as early as Monday.More news: Up to Five Inches of Snow Anticipated for Venango County