German Chancellor Gerhard Schroeder and opposition conservative leader Angela Merkel are to meet to resolve the impasse over who will lead the country.
Both leaders stake a claim to the chancellorship in a new coalition government, and the deadlock is now in its third week.
It is now widely expected that they will make a compromise deal.
The two parties have held three rounds of what they called exploratory talks with wider teams of colleagues, reports BBC.
According to Reuters, the talks are taking place three weeks after a federal election gave neither the conservatives nor the SPD enough votes to rule with their preferred partners. Schroeder's SPD, despite winning four fewer seats in parliament than the conservatives, has thus far refused to relinquish its hold on the Chancellery.
That should change on Monday. The rival parties are widely expected to strike a deal that would make Merkel Germany's first woman leader.
The SPD would yield their prime bargaining chip, Schroeder, to gain key ministerial posts and as many seats in cabinet as Merkel's Christian Democrats (CDU) and their CSU partners.
"I think Schroeder has understood that he will not remain federal chancellor," Wolfgang Schaeuble, deputy parliamentary leader of the conservatives, said on Sunday.
The leaders are expected to hold consultative sessions with their parties both before and after Monday's discussion round.
A deal over who leads Germany would open the door to detailed coalition talks over three weeks following the most inconclusive election result in postwar German history.
The talks to forge a power-sharing coalition of the country's two largest parties, dubbed a "grand coalition", are likely to drag into November. It would be only the second coalition of Germany's top two parties since World War Two.