Sources close to the negotiations say a temporary suspension of water charges for nine months, is expected to end the political deadlock.
It is hoped this will then pave the way for the establishment of a new Government.
As part of the new deal, it is expected an independent commission will be set up to examine the issue of water charges.
It is understood a meeting of the Fine Gael parliamentary party last night was not marked by any dissent over the proposed deal on Irish Water.
