Recasts and writes through

By Scott Murdoch and Rishav Chatterjee

March 21 (Reuters) - Australian property listings group Domain's DHG.AX largest shareholder, Nine Entertainment NEC.AX, confirmed on Friday it is in talks to sell its 60% stake as part of a A$2.65 billion ($1.7 billion) takeover from U.S. firm CoStar CSGP.O.

Nine's decision is key for the CoStar bid to proceed given its majority ownership and without its backing the proposal is unlikely to go ahead.

The unsolicited bid requires at least 75% support from shareholders to proceed.

News of the talks prompted Domain shares to rise 1.84% in early trade Friday, while Nine stock was down 0.94% as the S&P/ASX200 was flat.

CoStar has offered A$4.20 per share for Domain after picking up nearly 17% of the Australian company in a sharemarket raid in February.

The offer price was a 34.6% premium to Domain's share price before CoStar began buying. Domain is considered Australia's second-largest real estate listings firm behind the News Corp-controlled NWSA.O REA Group REA.AX.

Nine said it was in discussions with CoStar after the Australian Financial Review $(AFR.AU)$ reported the media company was looking for about A$4.65 per share for its stakeholding. Nine said negotiations about a revised proposal were confidential and incomplete.

"There is no certainty that the discussions will lead to a revised proposal from CoStar. Nine continues to assess the Proposal, including the strategic value of Domain to Nine, with a focus on the best interests of Nine shareholders," the company said.

Domain, in a separate announcement, said it was assessing the original bid from CoStar which emerged nearly a month ago.

Shares in Domain have gained around 39% since they began trading on February 21, while Nine has added over 10%. Domain closed trading on Thursday at A$4.34, higher than the A$4.20 bid by CoStar.

CoStar did not immediately respond to a Reuters request for comment.

($1 = 1.5873 Australian dollars)

(Reporting by Scott Murdoch in Sydney and Rishav Chatterjee in Bengaluru; Editing by Mohammed Safi Shamsi and Stephen Coates)

((Rishav.Chatterjee@thomsonreuters.com;))