A joint working party of trustees and senior executives from the two organisations said they had found "a compelling case for merger on grounds of efficiency and sustainability".
The working party recommended that the organisation should continue under the NCVO name, but that the names Volunteering England and Institute for Volunteering Research should be retained within the new organisation.
The organisations have set a target for the merger to be completed by early next year.
No announcements have been made about potential redundancies or about leadership of the new charity, although a joint statement said discussions would "focus on organisational structure and staffing and on membership services, as well as on due diligence". The NCVO has 102 staff; Volunteering England has 21.
The two organisations are already based in the same building in Regent’s Wharf, north London.
Volunteering England had an income of about £2m in 2011/12, down from £5.5m the previous year. The NCVO has previously said that it expected its 2011/12 income to be £8m, down from £10.1m in 2010/11.
Both charities have been hit by the loss of statutory funding, including a reduction in their grants through the government’s strategic partners fund. Volunteering England saw its grant drop from £1.6m to £500,000 in 2011/12, while the NCVO saw its grant fall from about £1.1m to £500,000 in the same year. Funding from this programme is gradually being reduced until it is withdrawn in 2013/14.
Martyn Lewis, chair of the NCVO, said the vision and values of the two organisations were closely aligned."We are a natural fit," he said. "We have encouraged the sector to consider mergers and collaboration, and we are practising what we preach. By joining forces we will create a stronger voice and better support for voluntary organisations and volunteering."