Hough, 28, and Reed, 25, were caught making out at Rock & Reilly's in Los Angeles recently, however, sources say they're not that serious, Us Weeklyreported.
"The whole group was drinking and partying. Derek bought shots for Nikki at the bar," an eyewitness told Us. "There was lots of PDA, Nikki was feeding him, holding hands, and they left together. They didn't seem to care if anyone was watching."
"She's such a sweet girl! Really down to earth. They are having fun hanging out. It's a good match," explained a source.
Reed has reportedly been supporting Hough in his Dancing with the Stars journey, as she hung out with Ballas' girlfriend BC Jean backstage during Monday night's broadcast.
"Nikki isn't currently dating anyone. She is focused on her divorce from Paul and caring for that relationship as well as her latest film projects," another source told Us, adding that Reed met Hough through his sister Julianne.
"Nikki and Julianne are good friends, and she has hung out with Derek a few times through her. They're having fun but it's nothing serious."
Hough dated another close friend of Julianne's, Nina Dobrev -- 24-year-old Vampire Diaries star -- back in September 2013. They reportedly broke up after six weeks because their long-distance relationship became too difficult and things had simply "played out" between them.
As for Reed, she and McDonald, 29, broke up after two-and-a-half years of marriage. Reed's representative told Us they have ended their union and are living separately due to work obligations.
Reed and McDonald wed in October 2011 after they got engaged in June of that year. The actress' representative said they continue to be "best friends" are still working together on their debut album "I'm Not Falling," which is scheduled to be released later this year.
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McDonald made it to American Idol's Top 8 but then became the first male finalist eliminated from the show's tenth season. He met Reed when Idol's finalists attended the premiere of Reed's The Little Red Riding Hood movie in March 2011.