Israeli Prime Minister Benjamin Netanyahu and his centre-right partners have overcome differences with rightwing factions to pave the way for an accord on a new government on Friday, reports said.
Media outlets said that Yair Lapid, head of Yesh Atid, and Naftali Bennett of Jewish Homeland renounced their demands for the post of deputy prime minister, a key obstacle to finalising a coalition agreement.
Israeli public radio said the long-awaited agreement was to be signed before the Jewish sabbath, or by Friday afternoon.
The leaders negotiating a coalition have until after the sabbath ends on Saturday evening to present their new coalition agreement to President Shimon Peres.
The new cabinet is expected to be sworn in before the parliament on Monday, 48 hours before the arrival of US President Barack Obama in Israel.
Media reports said that under the new pact, the key ministries of finance and education are to be headed Yesh Atid, which won 19 out of 120 seats at the January 22 election.
Jewish Homeland would head the portfolios of trade and industry, and housing which oversees the construction of Jewish settlements in the occupied Palestinian territories.
Netanyahu would also handle foreign affairs, pending the conclusion of a trial of former foreign minister Avigdor Lieberman, an ally of the premier.
The defence and interior ministries would also be retained by Netanyahu's Likud party, according to the reports.