Tesco has more than 3,000 stores across the United Kingdom, while Londis and Budgens owner Booker is the country's largest wholesaler.
Simon Polito, who was in charge of the in-depth CMA investigation said: "Our investigation has found that existing competition is sufficiently strong in both the wholesale and retail grocery sectors to ensure that the merger between Tesco and Booker will not lead to higher prices or a reduced service for supermarket and convenience shoppers".
The CMA pointed out that Tesco did not supply the catering sector, which makes up 30 per cent of Booker's sales.
It had earlier raised fears that more than 350 local areas where there is an overlap with Booker-supplied franchises such as Premier, Londis, Budgens and Family Shopper could face "worse terms".
The CMA said in a statement this morning that it had provisionally found that Tesco's anticipated acquisition of Booker "may not be expected to result in a substantial lessening of competition within any market or markets for goods or services in the United Kingdom".
A raft of rival wholesalers have raised concerns the deal could see Booker benefit from improved supplier terms making it hard for them to compete.
The £3.7 billion buyout has been subject to an aggressive pushback from competitors, with seven of Booker's biggest rivals last month demanding that the deal be blocked.
The CMA said the competitive landscape looked generally rosy because Booker had less than a 20% share of the United Kingdom grocery wholesaling market.
Retail analyst Bruno Monteyne at Bernstein said the tie-up would make Tesco "not only the biggest grocer in the United Kingdom but also one of the fastest growing food retailers in the United Kingdom for many years to come". The CMA will launch an investigation into the deal. Nisa members yesterday narrowly approved the £143 milion takeover of the chain by the Co-Operative Group, following an earlier abortive takeover by Sainsbury's.
The news sent Tesco's share price surging 6.36 percent to 188.25 pence in afternoon trade on the rising London stock market. Following the provisional decision, the CMA is now inviting further comment and evidence before coming to a final view.