Prime Minister Johanna Sigurdardottir said she would present a parliamentary bill authorising the start of membership talks.
Sigurdardottir did not give a timeframe for tabling the bill. But one politician, who asked to remain anonymous, told Reuters that the government would introduce it next week when parliament convened.
Sigurdardottir's Social Democrats have been in favour of EU talks, but their coalition partners, the Left-Greens, have been much more cautious about joining the bloc.
But the press in Iceland announced on Tuesday that the Social Democrats and the Left-Greens had reached an agreement on the European Union.
Many of Iceland's 320,000 people have warmed to the idea of joining the EU and ultimately adopting the euro currency.
The Icelandic crown virtually ceased trading in the aftermath of the crisis, triggered by the global credit crunch. Strict capital controls were introduced so Iceland could ensure it was able to import vital goods such as food and medicine.
Commentators and some politicians say the Social Democrats should be able to cobble together enough support to pass the bill, although haggling in parliament could mean it may be weeks before the bill actually comes to a vote.
A Gallup poll for state television on Wednesday showed 61.2 percent in favour of EU talks and 29.6 percent against. Those polled were evenly split over the issue of actual membership.
EU Enlargement Commissioner Olli Rehn, who is Finnish, did not hide his satisfaction that a Nordic country was contemplating EU membership. In an interview with EurActiv, he said that in the case of Iceland, the country's membership of the European Economic Area would serve as a 'shortcut' in negotiations.
(EurActiv with Reuters.)