Austrian conservative leader Sebastian Kurz has reached a coalition deal with the Greens to ensure his return to power and bring the left-wing party into government for the first time, a Greens spokeswoman and a source close to the talks said.
The deal comes three months after Mr Kurz's People's Party (OeVP) clearly won a parliamentary election on 29 September with 37.5% of the vote, requiring a coalition partner to command a majority in the lower house.
The Greens finished fourth with 13.9%.
Mr Kurz said the parties have got an "excellent result" in difficult negotiations.
"We have succeeded to unite the best of both worlds," said Mr Kurz.
Greens leader Werner Kogler said the two parties had to "build bridges" to form a government for "the future of Austria".
Despite progress to bridge the significant gaps, observers said the new government would face challenges after Mr Kurz's previous rule with the far-right Freedom Party (FPOe) saw a raft of anti-immigration measures passed, sharply dividing Austrians.
"2020 as a political year of change" ran the main online headline of the Kurier daily earlier.
Both the OeVP and the Greens will be hard-pressed to show they have not compromised too much on their key principals and campaign promises when they present the joint government programme, which is expected tomorrow.
"From his (Kurz's) perspective, it's a huge stretch and it's also a danger that over time he might lose some of the voters he gained from the Freedom Party," analyst Thomas Hofer said.
Mr Hofer said other European countries, such as Germany, could also see Conservative-Green party coalitions in the future. Sweden, Finland, Lithuania and Luxemburg already have Greens in government.
"Kurz is setting a certain trend maybe ahead of time, and this is certainly something also on the international stage that he would be able to sell," he said.
Mr Hofer described Greens chief Werner Kogler, who is expected to be vice-chancellor, as a "pragmatist" who had stabilised the party.
As junior coalition partner, the Greens would get four ministries, including an enlarged environment ministry that also comprises infrastructure, traffic, energy and technology, according to a party representative familiar with the negotiations.
The OeVP will maintain control of the rest, including the coveted interior ministry - previously headed by a far-right official and embroiled in scandal - and the finance portfolio.
Greens official Ewa Ernst-Dziedzic told the Standard daily in an interview that compromises are "part of democracy", and that the coalition partners would address challenges rather than "feign harmony and sweep difficult topics under the carpet".
The far-right FPOe - previously riding a wave of populist sentiment seen across Europe - was routed in the polls after the so-called "Ibiza-gate" graft scandal brought down their then-leader and vice-chancellor in May and caused the government to collapse.