Fallon is already part of the Sony roster, having won the main £70 million pan-European consumer electronics account last year.
Aiwa has also appointed OMD Europe to handle media planning and buying across the continent, although no decision has yet been made for other regions.
The agency's UK division picked up Sony Europe's £320 million pan-European planning and buying account last year.
W&K will be tasked with revitalising the brand, which was acquired by Sony last year as it struggled to compete with cost-cutting Asian rivals such as Sanyo, Hitachi and Toshiba, to focus on the youth market. Moving the bulk of its manufacturing base out of Japan, to cut costs and improve financial performance, had failed to turn the Aiwa business around.
The relaunch will be spearheaded by the introduction of a new range of products including Net MiniDisc PC recorders, DVD and MP3-compatible products.
Aldo Liguori, the director of corporate communications at Sony Europe, said: "I can confirm that Aiwa has entered a period of final discussions and negotiations with Wieden & Kennedy London regarding its new global marketing campaign. A decision will be made following the outcome of these final decisions."
In February, Sony upgraded what was initially a pan-European pitch, for which it had shortlisted StrawberryFrog and the Brussels-based BLD Europe, into a global brief.
In the same month, Aiwa hired Genius to create the first UK trade ads for its relaunch at the same time as it unveiled a revamped version of its red logo. As part of the freshening of the company's image, "enjoy Aiwa" will also appear on packaging.