Italian centre-left politician Enrico Letta has received a mandate to form a new government from President Giorgio Napolitano.
The new government, which could take office in a matter of days, will be backed primarily by the rival centre-left and centre-right groupings, which until now had refused to cut a deal following inconclusive elections in late February.
Formation of a government ends two months of damaging political impasse in Italy and sends a signal to markets that the country might at last be ready to make a start on much-needed reforms.
Letta, the nephew of former prime minister Silvio Berlusconi's long-time chief of staff Gianni Letta, is considered a moderate.
Italy's economy has been the most sluggish in Europe for more than a decade and mired in a deep recession since the middle of 2011, with no recovery in sight.