Senior Labour figures have described talks on forming a government with the Liberal Democrats as "constructive" after several hours locked in discussion.
Speaking as the Labour negotiating team emerged from the House of Commons after nearly three hours of talks, Ed Miliband said progress so far had been "good, constructive - constructive discussion".
Meanwhile, Liberal Democrats will hold further talks with the Conservative negotiating team on Tuesday afternoon at the Cabinet Office.
A Lib Dem source said details of progress with both Labour and the Tories would "most likely" be put before a joint meeting of the Lib Dem parliamentary party and ruling federal executive, and that the groups "stand ready" to meet.al negotiations between Labour and the Liberal Democrats have resumed in the House of Commons, as the parties struggle to form a viable government five days after the General Election.
Tory leader David Cameron insisted earlier on Tuesday that it was "decision time" for the Liberal Democrats, after his party offered an enhanced deal including a referendum on scrapping the first-past-the-post system for Westminster elections.
As he left his home in west London, Mr Cameron said: "I've made a very full, very open, very reasonable offer to the Liberal Democrats to deliver that stable government.
"It's now, I believe, decision time - decision time for the Liberal Democrats - and I hope they make the right decision to give this country the strong, stable government that it badly needs."
Lib Dem leader Nick Clegg insisted he was "as impatient as anyone else" to resolve the political impasse and said he hoped to make an announcement "as quickly as we possibly can". He added: "The discussions between the political parties has now reached a critical and final phase. We will act, as ever, responsibly. We will act to try and do our bit to create a stable, good government the British people deserve."
Gordon Brown, who announced on Monday that he would resign as Labour leader and thereby removing one of the major obstacles of a Lib/Lab alliance, was at the Commons on Tuesday while the talks with the Lib Dems continued.
After speaking with the PM, Home Secretary Alan Johnson said he had always been "hopeful" a deal could be made between Labour and the Liberal Democrats. He told the BBC News Channel: "I said before the election that coalition, partnership, held no fears for me. I obviously hope we can forge a coalition of the centre left with the Liberal Democrats because I believe - on the central issues of securing the recovery, protecting frontline services, changing the way we do politics in this country, through electoral reform - that we have got most in common."