The Tumblr sweepstakes have begun.

According to multiple reports (the first coming from All Things D), the social blogging site is in serious talks with Yahoo YHOO -0.26%, which is looking to secure a strategic investment, partnership or even an outright acquisition. In the latter scenario, the price could top $1 billion, which would represent a 25% premium over the valuation Tumblr got in its last funding round.

It could go even higher if the one-to-one talks turn into a bidding war. I’m told that Tumblr has held conversations that are similar in broad outline if not in seriousness with Facebook FB +0.38% and MicrosoftMSFT +2.29%. (Om Malik also mentions Facebook as a possibility.)

[Update: While the Facebook and Microsoft conversations are real, they’re irrelevant if Yahoo decides it wants to make an offer, as it’s currently negotiating under a lockup, according to a source with knowledge of the discussions. More details at the end of this post.]

I reached out to Tumblr founder and CEO David Karp for comment but didn’t immediately hear back. When I interviewed Karp for a FORBES cover story on Tumblr last December, he expressed wariness about the idea of selling out to a Yahoo-like entity, saying he was didn’t want to get “absorbed into a behemoth of another company and raided for talent and traffic.” But he also mentioned being open to “acquisitions that leave the company alone….There are a lot of paths for us.”

Since that time, Karp has acceded to pressure from his venture capital backers to begin the search for an executive — a “Sheryl Sandberg” — who would take over top-level managerial duties, freeing him up to focus on strategic and creative issues. That search is still ongoing, but at least one of the candidates approached is a former longtime Yahoo executive.

Meanwhile, former AOL AOL -0.51% and News Corp NWSA +1.13%. executive Jonathan Miller has been spending lots of time in Tumblr’s offices, where he’sengaged as a consultant. That puts him in pole position for the Sandberg job, if he wants it. And Miller’s pedigree would provide an additional level of comfort for a Yahoo or a Microsoft.

I’ll update this story as I learn more.

Update: A source with knowledge of the Yahoo/Tumblr discussions says they are proceeding rapidly and likely to result in an offer as soon as Yahoo CEO Marissa Mayer can get her board’s approval. She is said to favor an outright acquisition rather than an investment or partnership. As mentioned above, a lockup agreement prevents Tumblr from holding a bake-off with Facebook, Microsoft or anyone else.

Part of Mayer’s courtship has involved working overtime to convince Karp that his fears of being “absorbed into a behemoth” and “raided for talent and traffic” are unfounded. Karp has made it clear that he would like to run Tumblr for a long time. According to my source, he would remain CEO under the outline of the deal being worked out.