A draft deal aimed at meeting David Cameron's European Union reform demands will be unveiled later, including new powers for national parliaments to block unwanted proposals from Brussels.
European Council president Donald Tusk will publish the proposals for a "new settlement" between the UK and EU, but he acknowledged that there were still a number of outstanding issues to be addressed.
Among the changes proposed by the UK is a "red card" system which would allow a majority of national parliaments to join forces to veto new laws from Brussels.
The Prime Minister hopes to achieve agreement on his demands at a summit meeting of EU leaders on February 18-19, potentially paving the way for an early referendum on whether to remain in the 28-member bloc.
Mr Cameron will face a period of "intense" diplomatic activity in order to win the unanimous support of his fellow leaders, with major differences thought to remain on a number of his demands.
Agreement in February is regarded as crucial if the referendum is to be staged before the summer holidays, with a vote being held potentially as early as June.
"Following intense discussions on the draft text throughout Monday in Brussels, further progress has been made and the president of the European Council has now confirmed that he will circulate the draft negotiating text to all member states today," a Number 10 source said.
"A period of intense negotiation will then begin with all the other member states with the aim of securing their support for all the ambitious proposals, including this one on red cards."
Under the "red card" proposal, MPs in parliaments across the EU would have 12 weeks after a draft law is proposed to try to block it.
If 55% of national parliaments agree, they can club together with a legally-binding ability to force the European Council to stop the proposed legislation or amend in to address the concerns raised.
The source said: "This will strengthen the power of Westminster to stop unnecessary EU laws and addresses concerns that the current 'yellow card' system has not proved strong enough.
"It ensures that the European Commission cannot just ignore the will of national parliamentarians and delivers greater democratic control over what the EU does.
"As the Prime Minister has said, it it is national parliaments which are, and will remain, the true source of real democratic legitimacy and accountability in the EU and this breakthrough will ensure that national parliaments' voices are heard loud and clear in Brussels."
The Prime Minister is expected to set out further details of his renegotiation plan in a speech later, while Mr Tusk will present EU leaders with his proposed solutions to the UK's concerns over migration, sovereignty, competitiveness and protection for non-eurozone countries for consideration ahead of the crucial summit.
The measures include an "emergency brake" on welfare payments to EU workers, which it is expected could be triggered immediately after a vote to remain in the EU, on the basis of existing levels of immigration.
The mechanism has been put forward by Brussels as an alternative to Mr Cameron's plan to impose a unilateral four-year curb which other member states ruled out as discriminatory and in breach of the freedom of movement principle.
The PM agreed to accept it as a "stop-gap" measure - on the condition he received assurances the existing pressure on the UK would meet the threshold to trigger it and it could remain in place.
One critical stumbling block is the UK's demand for it to be allowed to remain in place "long enough to resolve the underlying problem" - perhaps as long as seven years.
Another measure believed to be on the table is a reform to prevent non-EU nationals using sham marriages with Europeans to maintain their right to remain in the UK.
But Downing Street denied suggestions that the UK was seeking a veto over further integration in the eurozone, insisting that Britain was instead asking for a system to be created to ensure any concerns from non-single currency members are properly addressed.
The "red card" proposal was dismissed as a gimmick by Brexit campaign group Vote Leave.
Chief executive Matthew Elliott said: "What the Government is asking for from the EU is trivial - these proposals will not take back control from the EU. These gimmicks have been ignored by the EU before and will be ignored again as they will not be in the EU treaty.
"The Government are asking us to trust the promises of the EU Commission and EU judges rather than taking back control. If the public want Parliament to have the power to block damaging EU laws then the only safe option is to Vote Leave."