The White House, the Pentagon and Democratic legislators have agreed on a path to allow gays to serve openly in the US military.
Legislation will be sent to Congress repealing the controversial "don't ask, don't tell" policy.
But, if passed, the repeal will not be implemented until after the Pentagon completes a review of its impact on the armed forces.
The measure may be voted on as early as Thursday.
The compromise was reached after a series of closed door meetings in the White House and on Capitol Hill.
The Obama administration had originally planned for the legislation to be enacted later in the year.
But gay rights groups have been pushing for a vote before the midterm elections in November, worried that momentum would be lost if Democrats suffered a setback or even control of Congress.
In the past, gays in the military has been a deeply divisive issue, almost derailing President Clinton's first few years in office.
But public opinion on the issue has shifted over time, with most American's now accepting of openly gay service-members, according to the Gallup polling organisation.
Republicans have signalled their opposition.
"The American people don't want the American military to be used to advance a liberal political agenda," Republican Representative Mike Pence said on Monday.
Gay rights advocates are embracing the compromise and pressing for a speedy vote.
"We are on the brink of historic action to both strengthen our military and respect the service of lesbian and gay troops," said Joe Solomonese, President of the Human Rights Campaign.