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"The leaders have agreed on a way forward," a spokesman for Democrat Majority Leader Harry Reid said.
The announcement came after the president offered $4.4bn (£2.2bn) more for border security, to be funded by fines taken from illegal immigrants.
The debate collapsed last week after opposition from some Republicans.
The latest deal was reached by Senate leaders after hours of intense talks.
The bill is expected to return to the Senate floor for additional debate by next week.
Key election issue
Earlier this week, President George W Bush met Republican leaders opposed to the bill to discuss their objections.
"We're going to show the American people that the promises in this bill will be kept," he said.
Last week's deadlock followed a series of amendments to the proposed bill, which undermined a fragile bipartisan compromise.
Illegal immigration is among voters' top concerns and is set to be a key issue in the 2008 presidential poll.
Under the proposed Senate bill, illegal immigrants would be able to seek a renewable "Z visa" after paying a $5,000 (£2,530) fine.
They could ultimately be placed on the path to permanent residency - a process that could take several years.
The bill also set out a "points system" that emphasises immigrants' education, language and job skills over family connections in awarding green cards.
But these measures would not come into force until 18,000 new border guards are deployed, the fence with Mexico reinforced and hi-tech surveillance put in place.
Some critics have labelled it an "amnesty" for those who have illegally entered the US, while others have argued that its guest worker programme threatens US workers.
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