The once prominent Internet start-up was sold to Betaworks, a technology development firm, the Los Angeles Times reported Thursday.
Digg peaked in 2008 with about 30 million visitors a month but began to decline in 2010 as it lost traffic to Facebook and Twitter.
Redesigns that were poorly received by site visitors further damaged its reputation and sent more traffic to other similar sites.
Betaworks said it plans to merge Digg, which still receives about 7 million monthly hits, into News.me, a start-up it launched last year that sends users content shared by their friends on Facebook and followers on Twitter.
Digg joins other Web entities that have suffered financial free-falls, like social networks MySpace and Friendster and social bookmarking site Delicious, although Digg's fall was the hardest.
MySpace was sold last year for $35 million, while Friendster was sold in 2009 for $26.4 million and Delicious was sold for $5 million last year, the Times reported.