The main opposition Awami League and its 13 leftist allies have threatened not to take part in the polls unless the ruling Bangladesh Nationalist Party (BNP) removes election officials they alleged are biased.
"We've made progress towards a final decision," Awami League general secretary Abdul Jalil said after the two sides held their fifth set of talks.
The progress in the talks came a day after Bangladesh's first Nobel laureate Muhammad Yunus made an impassioned appeal to both sides to reach a consensus on electoral reforms to pave the way for fair polls.
"The whole world is looking at us after the Nobel prize. It's now perfect time for the two major parties to reach a consensus so that we have a smooth election," Yunus said on Sunday.
Yunus won the Nobel Peace Prize on Friday for his pioneering work setting up the Grameen Bank, which offers tiny loans -- or micro-credit -- to very poor borrowers to help them become self-employed.
The opposition and government said they would hold their next meeting October 23 as they needed to consult with their party leaders and coalition partners.
The BNP's general secretary Abdul Mannan Bhuiyan also reported headway following the 40-minute session between the two men.
"We've made progress in our dialogue. We now need a decision from our leaders to reach the final decision," Bhuiyan said.
The groundbreaking talks between Bangladesh's two major parties began early this month but hit a roadblock after the opposition demanded the government agree to its key demand to change the planned chief of the interim government.
Former Chief Justice K.M Hasan is set to head the interim government, which is due to assume power from the BNP-led four-party coalition October 27 and oversee the staging of new parliamentary elections.
The Awami League said Hasan was ineligible to oversee the elections due to his past links with BNP.
The opposition has staged a slew of protests since June 2005 to force Prime Minister Khaleda Zia to agree to its demands that have killed at least six people and injured hundreds.

Copyright AFP (Agence France-Presse), 2006