The Tokyo-listed stock jumped 27.77% to finish at 230 yen, its maximum allowable single-day gain, on the report in Japan's leading Nikkei business daily.
The report, which cited unnamed sources, said AirAsia was in talks with its lenders over a possible takeover bid for money-losing Skymark.
In a statement, AirAsia dismissed the story as "speculation" and "just another industry rumour".
"Never seen such rubbish. AirAsia has no interest in Skymark in Japan," AirAsia chief executive Tony Fernandes wrote on Twitter.
"There have been no discussions with Skymark," he added.
The putative takeover target also questioned the report.