The draft measure will also need approval from the European Parliament to become law and joint talks are expected to be tough, as the assembly wants more stringent curbs.
Ambassadors from the bloc's 27 states were unable to reach a formal consensus but diplomats said there was enough of a majority for ministers to formally vote through a compromise put forward by Hungary, which holds the rotating presidency of the EU.
"We have seen strong support for the presidency proposal. A few countries voiced some reservations," a spokesman for the presidency said after the meeting of ambassadors.
"It's now on the agenda of the Ecofin next Tuesday and ministers will have the final say on the proposal."
Finance ministers will meet in Brussels next Tuesday (24 May) to vote on the ban and to discuss financial sector taxation and the bailout package for Portugal, among other items.
A naked sale is when the asset is not owned or when borrowing arrangements not made at the time of sale.
A second diplomat said there is more than a qualified majority for ministers to vote through the measure as only Britain, Sweden and Germany raised issues.
The compromise backs a ban on naked government debt selling which could only be lifted temporarily if trading volume fell below a threshold to be agreed at a later date.
Bone of contention
Hedge funds and other investors have been accused of speculating on falls in government bond prices, which has exacerbated the Greek crisis last year when the country had to be bailed out by the EU and International Monetary Fund.
The original proposal was authored by the European Commission.
Parliament voted overwhelmingly in committee in March to go further and introduce a ban on naked selling of sovereign credit default swaps (CDS) as well as sovereign debt and shares.
Member states have stopped short of banning naked CDS sales - despite efforts to the contrary by Germany on Wednesday - but agree to curbs on short selling of shares and government bonds where no arrangements have been made to borrow the security in time for settlement.
Britain told Wednesday's meeting that giving the new pan-EU watchdog, the European Securities and Markets Authority, emergency powers to impose trading curbs was illegal, diplomats said.
The draft law also seeks to ensure that regulators in each EU state adopt a common approach to the reporting of short positions in shares and other instruments.
After the collapse of Lehman Brothers in September 2008, EU states took unilateral action in banning the short-selling of financial shares, leaving investors with a patchwork of rules.
(EurActiv with Reuters.)