Lancashire County Council is set to be led by the Labour party supported by the Liberal Democrats in a minority administration.
A provisional agreement has been reached by negotiators from the two groups after three weeks of talks.
The matter will be put to each party this morning before the annual meeting of the full council today, when the council must appoint its new leader.
A Lancashire County Council spokesman said: “Full details of the agreement will follow ratification.”
None of the political parties gained the 43 seats necessary to take full control of the council in an election on May 2.
Labour won 39 seats, the Conservatives 35 and the Liberal Democrats six. Independent candidates won three and the Green Party one.
The Liberal Democrat leader Coun Bill Winlow had suggested a cross-party ‘rainbow coalition’ could be the answer.
But Labour leader Coun Jennifer Mein said they would not ‘enter into any form of coalition’ with the Conservatives.
Coun Geoff Driver, whose Conservative party have led the council for the past four years, said they had not been able to reach an agreement with the other parties.
Coun Mein and Coun Winlow were both unavailable for comment yesterday.
Speaking before the announcement, Coun Winlow said: “With no single party winning a mandate, we had hoped that all parties would put aside their political differences and work together.
“County Hall needs to save £1 in every £3 it currently spends in order to make the books balance over the next four years.
“We regret that the Conservatives have broken off talks. Despite extensive efforts on our part the Conservatives showed little intention to conclude an agreement.
“Lib Dems will nonetheless continue to talk to both the Greens and Labour in the hope of joining with them in a progressive administration for the benefit of Lancashire residents.”