It is the latest big investment in cloud computing by Oracle, the world's No. 2 maker of business management software, and a quick response to larger rival SAP AG's pending plan to buy SuccessFactors Inc for $3.4 billion.
Oracle's offer price for Taleo is 6.5 times trailing 12-month sales, a bit more than half the 12 times multiple that SAP will pay for SuccessFactors, according to Evercore Partners.
While Oracle lags SAP in selling traditional software that customers install on their computer systems, its billionaire CEO Larry Ellison has been aggressive in adding cloud-based software offerings over the past few years.
Last month, Oracle paid $1.5 billion to purchase established cloud player RightNow Technologies, whose software helps companies provide customer service.
Oracle and SAP are both trying to catch up with cloud leader Salesforce.com Inc, which was started over a decade ago by former Oracle executive Marc Benioff.
Oracle's Ellison was an early investor in Saleforce, but Benioff ousted him from the board when he felt Oracle got too aggressive in competing with the firm.