German Chancellor Angela Merkel and her ex-coalition partners, the centre-left Social Democrats, are to hold talks in efforts to end a political impasse.
Earlier, the SPD softened its stance and said it was open for discussions.
Leader Martin Schulz, who has refused to renew a coalition with Mrs Merkel’s conservatives, is under pressure from party allies to change his position.
Mrs Merkel failed to form a coalition government with the liberal Free Democrats and the Greens this week.
German President Frank Walter Steinmeier, who is holding talks with party leaders in efforts to break the stalemate and avoid a snap election, said he would host the talks between Mrs Merkel and the SPD next week.
Mr Schulz, who met Mr Steinmeier on Thursday, said he would ask his party to vote on whether to take part in another coalition.
The SPD was in government with Mrs Merkel between 2013 and 2017 and said it would not renew the deal following the 24 September election, when the party had its worst election result since 1949.
On Friday morning, after eight hours of late-night talks between top SPD politicians, the party’s General Secretary Hubertus Heil said the SPD would “not say no to discussions”.
However, he did not say which parties the SPD would negotiate with, nor if they would join another “grand coalition” led by Mrs Merkel’s Christian Democrats (CDU) and their Christian Social Union (CSU) allies.
Mrs Merkel’s ministers remain in office in a caretaker role, as the election produced no overall majority.
Facing the biggest crisis of her political career, Mrs Merkel has said she would prefer new elections to an unstable minority government.
Until a government is agreed, Mrs Merkel continues as acting chancellor, while the newly-elected German parliament sits as normal.