The merger is significant as it opens the way for ISIL to take control of both sides of the border at Albu Kamal in Syria and al-Qaim in Iraq, according to the Syrian Observatory for Human Rights.
ISIL -- which aspires to create a so-called Islamic state that straddles Iraq and Syria -- has spearheaded a lightening militant offensive that has captured swathes of territory north and west of Baghdad this month.
After months of clashes between the two sides, al-Qaeda's official Syrian arm the al-Nusra Front "pledged loyalty to ISIL" in Albu Kamal on Wednesday, said Observatory director Rami Abdel Rahman.
"The pledge comes amid advances by ISIL in Deir al-Zour province" in eastern Syria on the Iraqi border, Abdel Rahman told AFP.
An ISIL militant confirmed the reports on Twitter, and posted a photograph showing an Egyptian al-Nusra Front commander shaking hands with an ISIL leader of Chechen origin.
Although both ISIL and al-Nusra are rooted in al-Qaeda, the two have been rivals for much of the time that ISIL has been involved in Syria's civil war since spring last year.
"They are rivals, but both groups are jihadist and extremists. This move will create tension now with other rebel groups, including Islamists, in the area," said Abdel Rahman.
An opposition activist in Albu Kamal told AFP via the Internet that "there is a lot of tension, and the situation is only going to get worse."
Using a pseudonym for security reasons, Hadi Salameh also said the merger would "cause a big problem with the local tribes, who will not welcome this change".
Also on Wednesday, the Syrian air force carried out air raids targeting ISIL-controlled Raqa in the north of the country and Muhassen in the east.
Syria has been gripped by deadly violence since March 2011. According to reports, Western powers and their regional allies - especially Qatar, Saudi Arabia, and Turkey - are supporting the militants operating inside the country.
HH/HH