• The online mall is said to be raising up to $500 million
  • An investment will extend Alibaba’s expansion into the region

Alibaba Group Holding Ltd. is in talks to make a major investment in Indonesia’s PT Tokopedia, people familiar with the matter said, potentially scoring a second deal to accelerate its expansion into Southeast Asia’s largest economy.

The Chinese company is in negotiations to lead a funding round in Indonesia’s largest online marketplace of up to $500 million, one of the people said, asking not to be identified because the deal is private. Alibaba, which already controls Lazada Group SA, would be joining existing backers SoftBank Group Corp. and Sequoia Capital if the financing goes through.

An alliance with Alibaba would likely preclude a deal with JD.com Inc., which was also in talks to invest hundreds of millions of dollars in Tokopedia, a person familiar with the matter told Bloomberg in…