The draft agreement on compensation for the families of nine Turkish activists killed by Israeli commandos May 31, 2010, was reached during a Jerusalem meeting that brought the highest-level Turkish diplomatic mission to Israel since relations were frozen after the raid, officials said.
"The meeting was conducted in a good and positive manner," the office of Israeli Prime Minister Binyamin Netanyahu said.
"The delegations reached an agreed draft, but further clarifications are required on certain subjects," the office said, adding the two sides expected "to come to an agreement in the near future."
It offered no agreement details.
The Turkish delegation, led by Foreign Affairs Undersecretary Feridun Sinirlioglu, a former Turkish ambassador to Israel, kept a low profile, saying in a brief statement an agreement was near.
Netanyahu was in China when Monday's meeting took place. Israeli national security adviser Yaakov Amidror and Joseph Ciechanover, appointed by Netanyahu in August 2010 to represent Israel, led the Israeli delegation.
The meeting lasted more than eight hours, officials said. It followed a daylong meeting between the two delegations in Ankara, Turkey, last month.
Turkey used to be Israel's closest ally in the region and its most important partner in the Muslim world.
But Ankara broke off relations after the Israeli commandos raided the Turkish ship MV Mavi Marmara in international waters of the Mediterranean Sea as the ship attempted to break Israel's naval blockade of the Gaza Strip.
All nine activist casualties were caused by gunshots, some of them at point-blank range or from behind, a 2011 U.N. report said. Many other people were injured in the raid.
The ship -- one of six in a "Gaza Freedom Flotilla" -- was carrying humanitarian aid and construction materials. Its crew had the stated intention of breaking blockade.
U.S. President Barack Obama brokered the Turkish-Israeli reconciliation when he visited Israel in March. He urged renewed cooperation between the two important U.S. allies as the Syrian war threatened to spill over and destabilize the broader region.
In a 30-minute phone call March 22, Netanyahu officially apologized to Turkish Prime Minister Recep Tayyip Erdogan for operational mistakes that led to the deaths and promised compensation and a further easing of restrictions on Gaza.
Erdogan accepted the apology and both leaders agreed to enter into discussions on Israel's "non-liability" compensation to the families.
Once compensation terms are reached, Israel and Turkey are expected to normalize relations and send ambassadors to each other's nations, The Jerusalem Post said.