German Chancellor Angela Merkel's Christian Democratic Union (CDU) party has agreed a blueprint with the country's Social Democrats (SPD) on moving ahead with formal coalition talks.
The 28-page document comes after a marathon overnight session at the end of a week of negotiations.
The document outlines the compromise positions of two parties on a wide range of issues including taxes, migration and healthcare
CDU politician Julia Kloeckner, part of Mrs Merkel's negotiating team, tweeted on Friday morning: "Many, many hours of work, serious wrangling and shaping are contained in these 28 pages."
Social Democrat spokesman Serkan Agci said there had been a "breakthrough" agreed upon by the party leaders - but said final revisions were still being made on the document by negotiating teams, which would also need approval.
Both sides still need to come to an actual coalition agreement, which would then have to be approved in a ballot of the Social Democrats' entire membership.
If the talks had failed, Mrs Merkel's only options would have been to form a minority government or to hold new elections.
Mrs Merkel has struggled to form a government since federal elections last September, despite appearing to have secured a fourth term as Chancellor.
The conservative CDU / CSU alliance emerged as the largest group with 246 seats in the Bundestag - far short of the 355 needed for a majority.
The Social Democrats, led by the former European Parliament president Martin Schulz, had initially ruled out entering a fresh 'grand coalition' with Mrs Merkel's bloc, after both groups lost dozens of seats.
The political situation became more urgent in November when the CDU's potential coalition partners, the Free Democrats, walked out of discussions, saying there was no "basis of trust" to forge a government with Mrs Merkel's conservative bloc and the Greens.
German President Frank-Walter Steinmeier ultimately urged the two largest parties to return to the negotiating table.
Reporting by Stephen McNeice, with additional reporting by IRN