Kenya's rival political parties have agreed to set up an independent panel to review last year's disputed elections, Kofi Annan has said.
All smiles for the cameras last month but deep divides remain
The former United Nations secretary general however said that a possible power-sharing agreement had not yet been finalised.
The opposition has accused President Mwai Kibaki of rigging the poll.
The dispute has led to protests, in which at least 1,000 people have died and 600,000 have fled their homes.
The independent panel, including Kenyan and non-Kenyan experts, will investigate "all aspects" of the disputed election, said Mr Annan.
The committee is due to start work on 15 March and submit its report within three to six months, he added.
"We are there, we are very close, we are moving steadily," Mr Annan said, after two days of secret talks to end the crisis.
He is due to meet Mr Kibaki and opposition Orange Democratic Movement leader Raila Odinga on Monday.
The BBC's Karen Allen in Nairobi says the teams may have agreed in principle to share power but details still need to be ironed out.
The international community is pushing for a deal which would see Mr Odinga form a coalition with President Kibaki.
On Thursday, government negotiator Mutula Kilonzo said the two sides had agreed to write a new constitution within a year.
This could pave the way for the creation of the post of prime minister, which Mr Odinga could take; however the opposition team says the issue of power sharing needed to be resolved first.
End the crisis
Our correspondent says other details which would need to be worked out are the division of ministerial portfolios in a grand coalition.
During the talks, German's Foreign Minister Gernot Erler briefed both teams on how the country's grand coalition would work during a session on power-sharing.
The teams are expected to get further briefings from their leaders before the talks resume next week.
US Secretary of State Condoleezza Rice is due to arrive in Kenya on Monday to help put pressure on both sides to reach a deal.
Mr Annan had expressed optimism that a political settlement that will end the crisis would be reached within three days.
He has said it would be too dangerous to hold new elections for at least a year.
Foreign diplomats have warned representatives of both sides of dire consequences if they scupper the process.
But Justice Minister Martha Karua, who heads the government side, has asked them to refrain from threats as Kenya charts its own course.
"I would like to remind them we are not a colony and they should adhere to the diplomatic convention of not interfering with sovereign states," Ms Karua told reporters soon after arriving in Nairobi from the talks.
The future of Kenya may depend on the negotiations
Meanwhile, human rights activists have accused police of "sleeping on the job" for allegedly failing to investigate claims of criminal behaviour at the Electoral Commission of Kenya (ECK).
They presented a list to the attorney general of 22 ECK officials and other staff, who they believe were involved in forgery, subverting the rule of law and failing in their statutory duty during the 27 December election.
International election observers say there were numerous discrepancies in the way the votes were counted and results announced.
The human rights groups have urged the attorney general to order an investigation and warn that if their pleas are ignored they will opt for a private prosecution.