France and Germany have called for tougher regulation for the world's financial system at the G20 summit.
French President Nicolas Sarkozy, who has threatened to walk out of the meeting, said that new financial regulation was a "non-negotiable goal".
In London's financial district, police and protesters have clashed. A protester died after he collapsed.
Meanwhile, US President Barack Obama and his wife Michelle have met the Queen at Buckingham Palace.
The G20 leaders attended a state dinner at Downing Street, where they began to hammer out a final agreement.
They were served a meal of Welsh lamb, Jersey Royal new potatoes and asparagus cooked by celebrity chef Jamie Oliver.
G20 LONDON SUMMIT
World leaders will meet on Wednesday and Thursday in London to discuss measures to tackle the downturn. See
our in-depth guide
to the G20 summit.
The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the UK, the US and the EU.
The formal summit meeting will take place on Thursday in the Excel Centre in London's Docklands.
There have been divisions between France and Germany, who want the financial system to be subject to far stricter rules, and the US and the UK, who have emphasised the need for more government spending to boost the world economy.
But early signs are that a consensus is emerging and a deal will be reached.
The main sticking point may be how much extra money the International Monetary Fund will receive to help countries in trouble, while there is agreement in principle on regulation and government spending.
Throughout the day, the leaders held bilateral talks to thrash out final details of the proposed reform plans. Key developments included:
Angela Merkel called for more support for the world's weaker nations
French President Nicolas Sarkozy and German Chancellor Angela Merkel have held a joint press conference to underline their call for tighter regulation of the global financial sector.
Police said that up to 5,000 protesters - anti-capitalists, anarchists, and climate change activists - had descended on London's financial centre, with 32 people arrested. The protesters stayed late into the night.
In the early evening, a man collapsed and stopped breathing while protesting, police said.
He was taken to a nearby hospital, where he was pronounced dead.
G20 PROTESTS: KEY FLASHPOINTS
Protests by mix of groups focused on major banks in Threadneedle Street
Riot police clashed with some protesters and at least 20 arrests were made
Climate change protesters set up camp outside European Climate Exchange
Protests are expected to target conference at ExCel centre on 2 April
After a breakfast meeting with Prime Minister Gordon Brown, US President Barack Obama said a "sense of urgency" was needed to confront the most severe economic crisis since World War II.
He said the G20 had to reject protectionism and support emerging markets, and called for countries to work together.
"The United States is committed to working alongside the United Kingdom in doing whatever it takes to stimulate growth and demand and to ensure that a crisis like this never happens again," the US President said.
Mr Brown said the G20 leaders were hours away from agreeing a plan for economic reform.
President Sarkozy and Chancellor Merkel said institutions that did not comply with new any rules agreed by the summit should be identified.
Meanwhile, the head of the International Monetary Fund, Dominique Strauss Kahn, told the BBC that the most important thing was for countries to clean up their balance sheets.
He also wanted the IMF's funds doubled.
Indeed, the IMF may be the main winner in the summit, the BBC's economics editor Stephanie Flanders says.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.