The online travel site is offering $38.31 a share for the vacation-rental company, a 20 percent premium on HomeAway's closing price.
Announced after Wall Street's close, the deal follows a two-year partnership between the companies. Bringing HomeAway into Expedia's fold "is a logical next step," Expedia CEO Dara Khosrowshahi said in a statement.
HomeAway lets users arrange vacation rentals at 1.2 million properties around the globe.
Shares of Expedia rose 4 percent to $139.48 in after-hours trading, after falling 1.6 percent to close at $134.17 during the regular session. HomeAway surged 22 percent to $39.15 in after-hours trading, after rising 1 percent to $32.04 during the regular session.