Warner Bros. and Polygram Filmed Entertainment are in advanced discussions to jointly finance Castle Rock Entertainment’s production and marketing costs for as many as five features through a split-rights deal, sources close to the talks confirmed Sunday.

Castle Rock president Martin Shafer declined to comment about published reports that a deal was imminent. Warner and Polygram reps could not be reached for comment.

But sources confirmed it looked likely Polygram would partake in the next two Castle Rock releases, Whit Stillman’s long-awaited “Last Days of Disco” and Hugh Grant starrer “Mickey Blue Eyes.”

It was unclear whether the companies would divide foreign and domestic rights or if they would co-finance Castle Rock and share in the box office. Polygram needs product to send thruogh its recently launched distribution arm, but it’s not clear how many Castle Rock pics will go out under the Polygram label. One insider said those details have yet to be worked out.

“The Last Days of Disco” is due out in May and Warner Bros. is slated to release it.

Castle Rock is in the final legs of a long-term deal with Columbia Pictures for distribution. That pact closes with the Billy Crystal comic starrer “My Giant,” which opens March 27.

Castle Rock has thinned its ranks in the past eight months after three difficult years with problematic performances from such pics as “The American President” and “City Hall.”

When Time Warner absorbed Turner Broadcasting System last year, Castle Rock became a division of Warner Bros. At the time, the company had a staff of 120 and released between eight and 12 pics per year.

Warner Bros. had mixed feelings about keeping the small company that had once produced such hits as “When Harry Met Sally …,” “City Slickers,” “In the Line of Fire” and “Misery.” WB tried at the beginning of the year to sell Castle Rock, but couldn’t find a reasonable deal.

New direction

So Warners fully shifted the company into its own film division with the mandate to produce five pics per year. Still, Warners encouraged any interest from co-financiers, much as it did with Arnon Milchan’s New Regency Prods., a company that co-financed its pics through foreign sales.

Polygram, which once rejected a purchase of Castle Rock’s film division because of the Columbia deal, showed renewed interest recently, anticipating the conclusion of the Col pact.

Sources said Castle Rock’s TV division, which has long helped the company, largely due to the hit show “Seinfeld,” will have nothing to do with the Polygram/Warner Bros. arrangement.