AvtoVAZ and Fiat are discussing a possible $US800m joint venture to produce car engines in Russia, AvtoVAZ president Vladimir Artyakov was reported to have said on Thursday.

AvtoVAZ, Russia's largest car maker, had proposed constructing a plant in the town of Tolyatti to produce at least 450,000 engines a year, Artyakov told Reuters.

"AvtoVAZ proposed it, and Fiat responded," he said.

Artyakov added Fiat was prepared to supply engines for assembly but did not tell the news agency how the investment might be financed.

Reuters noted that AvtoVAZ, controlled by Russian state arms trader Rosoboronexport, has in recent years held talks on a possible joint venture with Renault but negotiations stalled when AvtoVAZ refused to sell a blocking stake.

The Russian company has also discussed possible partnerships with Peugeot-Citroen and Porsche, the news agency report added.