Tony Blair's anti-terror measures are due to go back before MPs, after peers again voted to amend the bill.
The government has conceded that judges should issue control orders
Lords insisted that a time limit or "sunset clause" should be added to the bill, which allows control orders to be imposed on terror suspects.
The Lords also demanded a higher burden of proof before the orders could be imposed, and said a group of senior politicians should review the new law.
MPs will vote on those demands before peers return to the House at 0500 BST.
Sunset clause: 192 to 107
Burden of proof: 182 to 111
Review of law: 178 to 110
The bill is to replace current law expiring on Monday.
Tory and Lib Dem MPs have also said they want further changes before they will back plans for new restrictions on suspects.
With Labour refusing to budge there is the prospect that the bill could ultimately fall.
The prime minister earlier insisted he was acting on the advice of the police and security services.
He said concessions had already been made on the bill and "there's now no reason not to support it".
Government concessions already made include that judges and not politicians, should make the final decision on the imposition of all control orders for both British and foreign terrorist suspects.
Ministers also told MPs the plans would be voted on annually by Parliament in the hope that this would meet demands for the sunset clause.
Control orders could range from tagging to house arrest.
If the bill falls it is expected that the current anti-terror measures - deemed to break human rights laws - would be extended for a short period.
'Need to budge'
On Wednesday Tory leader Michael Howard accused Mr Blair of refusing to compromise so the bill would fall and he could then claim Labour were toughest on terror.
Lib Dem home affairs spokesman Mark Oaten said even if the government agreed to the sunset clause plan, that would not be enough for his party to support the current bill.
"We remain convinced they need to budge on standard of proof and the ability of defendants to see the evidence against them," he told the BBC.
The government brought forward the Prevention of Terrorism Bill after the Law Lords ruled against existing measures which allow foreign terror suspects to be held indefinitely in prison without trial.
Nine people are still being held under those measures - due to run out on Monday - while a tenth man was on Thursday released on bail and electronically tagged.
The government says it wants to replace the powers with the new anti-terror bill instead of renewing them.
The control orders are intended for cases where it would not be possible to prosecute someone in court - but where intelligence suggested the person posed a terror risk.
The new measures would for the first time allow measures to be taken, without trial, against British citizens suspected of terrorism.