Judge Robert Ross said Friday the estranged couple have a week to reach an agreement before meeting in court again, People magazine reported. If there is no agreement, the case will go to trail.
"I'm happy we're working on an agreement," said Dina Lohan.
Michael Lohan, who hasn't been allowed to see his three youngest children with Dina, said the two "will have an agreement signed by next Friday. I hope to be reunited with my children very shortly and be a part of their lives."
Dina Lohan said she spoke to her daughter "all the time," but declined to comment on her daughter's next move.
The actress has been out of the media eye since her second arrest for driving under the influence during the July 4 weekend.
The Lohans have been separated since 2005.