The City of Subiaco and the City of Nedlands are the first two local government councils in the metropolitan area to start talking about the possibility of merging.
Last night the Subiaco council decided to enter into a Regional Transition Group.
The state government established the groups to assist reform in the local government sector and provide a structure for transitioning several local governments into a single entity by 2013.
So far 12 local governments have agreed to form Regional Transition Groups to determine if amalgamation will benefit their local communities.
Those councils are Koorda Trayning and Mount Marshall, Brookton and Pingelly and Beverly, Cunderdin, Quairading, Tammin and York.
Acting Local Government Minister John Day commended the City of Subiaco for its decision.
"Last night's important decision will enable the cities of Subiaco and Nedlands to jointly prepare a Regional Business Plan, funded and fully supported by the state.
"This planning will enable both cities to undertake due diligence to determine the costs of undertaking the change and the mutual benefits in merging.
"This next step is crucial as it allows Subiaco and Nedlands to be fully informed before making a final decision to merge and create a new local government entity," he said.
The Minister said he strongly advocated reform within Perth's western suburbs, where six local governments, each with their own administrations and comprising 61 elected members, preside over a population of about 65,000 residents.
