The two actors were spotted together this weekend walking their dogs outside an apartment in Boston, where Reynolds is filming upcoming action film R.I.P.D..
"They are very much a couple," a source told People. "They're really happy together."
Lively split from fellow Hollywood actor Leonardo DiCaprio earlier this month after a summer romance which began at Cannes Film Festival in May.
Reynolds finalised his divorce from Scarlett Johansson in July this year, and his ex-wife has since been linked to Inception star Joseph Gordon-Levitt.
Watch Ryan Reynolds and Blake Lively in the trailer for Green Lantern below: