The leader of Israel’s party, Ehud Barak, has agreed to it joining a coalition headed by Benjamin Netanyahu, according to Israel Army Radio.
Mr Barak would retain his post as defence minister in the new Likud-led administration if the deal is approved by the Labour Party.
Although Mr Barak has the support of senior Labour minister Yitzchak Herzog, others in the party are yet to be convinced of its political merits.
If Labour does come on board, Mr Netanyahu will have the backing of 66 out of 120 Knessset members in a coalition that also includes Avigdor Lieberman’s right-wing nationalist Yisrael Beiteinu and the Orthodox Sephardi party, Shas.
Mr Netanyahu has until next Friday to stitch together his coalition, which Tzipi Livni’s Kadima party has refused to join.