The plan calls for Kayak to operate as a subsidiary and would leave its management team intact, Priceline said.
Kayak was launched eight years ago and went public in July. In the third quarter, the firm posted net earnings of $8 million with sales at $78.6 million, up nearly 30 percent from the third quarter of 2011, CNNMoney reported Friday.
The cash and stock deal is expected to close in early 2013 if regulators and shareholders approve it.
Kayak shares jumped 26 percent when the deal was announced, while Priceline shares slipped 3 percent.
Buying companies is not new to Priceline, which is only 12-years old.
The firm also acquired Booking.com, which specializes in European hotel bookings and TravelJigsaw, a British car rental website.