Israeli Prime Minister Benjamin Netanyahu and the leaders of two parties likely to play a key role in the new coalition have overcome their differences and are to sign government deal on Friday, reports said.
Media outlets said the breakthrough occurred after Yair Lapid, head of the centrist Yesh Atid, and Naftali Bennett who leads the far-right Jewish Home party gave up demands for the post of deputy prime minister.
Israeli public radio said the long-awaited agreement was to be signed on Friday afternoon before the start of the Jewish sabbath which begins at sundown.
Netanyahu has until Saturday evening to present the 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.
Widespread media reports said the deal would involve Yesh Atid, which won 19 of the parliament's 120 seats in the January elections, taking the finance and education ministries, while Jewish Home, which won 12 seats, would take the trade and industry, and housing portfolios.
Netanyahu was expected to temporarily handle foreign affairs, pending the conclusion of former foreign minister Avigdor Lieberman's trial on charges of fraud and breach of trust.
Lieberman's hardline Yisrael Beitenu ran on a joint ticket with Netanyahu's Likud, with the list winning a narrow victory of 31 seats.
Likud was also to take charge of the defence and interior ministries, press reports said.