No official word was forthcoming from the team in the wake of a report that stated the seven-times world Champion had signed a one-year deal worth an estimated £6.25million. Schumacher's spokeswoman, Sabine Kehm, also refused to confirm the news being run on German online newspaper website, bild.de.
The paper claims the German travelled to Mercedes' Brackley base on Tuesday to complete the deal.
Schumacher's possible comeback after a three-year absence has been a story that has persisted since the season-ending Abu Dhabi Grand Prix in early November.
The German, who will turn 41 on January 3, was seen in talks with Daimler boss Dieter Zetsche and Brawn GP team principal Ross Brawn in the paddock of the Yas Marina circuit.
It was Brawn who was the genius behind Schumacher's seven titles during a glittering 16-season career, winning two championships with Benetton in 1994 and 1995, and then five with Ferrari from 2000-2004.
The Schumacher era came to an end in 2006 after 249 grands prix and numerous records, most notably those titles and 91 race victories.
But Schumacher's natural racing instinct has never deserted him as over the intervening period he has competed in various karting and motorbike events.
It was during a bike test in Spain in February that Schumacher suffered a neck injury which prevented him from making a return to F1 with Ferrari in August.
Ferrari president Luca di Montezemolo had managed to convince the 40-year-old to come to the aid of the team in its hour of need, in the wake of Felipe Massa's horrific accident in qualifying for the Hungarian Grand Prix at the end of July.
In testing a 2007-spec Ferrari in preparation for his eagerly- anticipated 'second coming' at the European Grand Prix in Valencia, Schumacher surprised himself at the fact he had lost none of his speed and reflexes.
Yet it was with great sadness, as confirmed by Di Montezemolo, that Schumacher announced he could not return as his neck was not up to the rigours of competing in a grand prix.
However, the seed had been sown, with Mercedes turning to Schumacher after losing world champion Jenson Button to McLaren following their takeover of Brawn GP just over five weeks ago.
Di Montezemolo cleared one obstacle when he confirmed earlier this month he would not hold Schumacher to his contract as advisor to the team, and ambassador for Ferrari's road car division.
The only remaining hurdle is also understood to have been overcome as Schumacher's manager, Willi Weber, recently stated his charge was now "super fit".
"(His doctor) Dr Peil said he has made giant progress," added Weber.
Despite his age, the likes of world champions Niki Lauda, Nigel Mansell and Damon Hill all believe Schumacher can make a winning return to the sport.
Nico Rosberg, who signed for Mercedes shortly after the Abu Dhabi GP, has warned Schumacher not to expect to comfortably slip back into the old routine.
"It will not be easy for him," said Rosberg in Stuttgarter Zeitung.
"When you stay away from F1 for a long time, it takes time to get used to all the test sessions again. It's not simple."
In what would be an all-German team, however, Rosberg is naturally thrilled at the prospect of Schumacher's impending return.
He said: "I have no idea if it (a comeback) is true or not, but if he did join that would be an absolutely fantastic move."
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