Women of the Wall spokeswoman Shira Pruce said the decision was a “revolution for women and Jewish pluralism in Israel”.
The area will be located at the south of the Western Wall Plaza, near Robinson’s Arch, the area of the Kotel where, in 2013, women were first allowed to wear prayer shawls while praying at the Wall.
The space, which will be accessible from the same entrance as the rest of the Wall, will be 9,700 sq ft and is estimated to provide space for around 1,200 people.
Rabbi Danny Rich, Chief Executive of Liberal Judaism, said of the proposal: “This is a landmark decision for Jews throughout the globe. It recognises that Judaism is an inclusive religion with a variety of different but valid expressions.
"Equality of gender, ethnicity and sexual orientation are central to Liberal Judaism and now at last progressive Jews can celebrate Judaism in keeping with the modern world at our most holy site."
The Israel Religious Action Centre and the Israel Movement for Reform and Progressive Judaism hailed Sunday’s agreement as historic.
“This landmark decision gives expression to a fundamental truth: there is more than one way to be Jewish,” it said in a statement. “There is more than one way to pray. There is more than one way to connect to Jewish traditions and identity.”