Minister for Children and Youth Affairs Katherine Zappone and Minister for Public Expenditure and Reform Paschal Donohoe are understood to have agreed on the childcare package that will be contained in Budget 2017, to be announced next Tuesday.
The reported agreement comes after 19 days of negotiations.
Ms Zappone had proposed a direct subvention payment to providers which would be firstly geared towards low-income families.
Fine Gael backbenchers had concerns that the squeezed middle were being excluded.
Details of the package have not been revealed.
Mr Donohoe earlier said he expects to be working through the weekend to finalise the spending measures for Budget 2017.
He said he was in a middle of very difficult negotiations with a variety of colleagues.
He added that he and Minister for Finance Michael Noonan would be briefing the Cabinet tomorrow.
