Chancellor Jeremy Hunt is poised to grant a £300m funding package for struggling British Steel, the BBC has been told.
The move follows requests from Business Secretary Grant Shapps and Levelling-up Secretary Michael Gove.
It would depend on British Steel's Chinese owner Jingye committing to securing jobs at the company and making additional substantial investments.
Treasury sources said the money would have to be put towards decarbonisation.
It is unclear when a decision will be announced.
The Department for Business, Energy and Industrial Strategy (Beis), said the government "recognises the vital role that steel plays within the UK economy, supporting local jobs and economic growth".
It said it was "committed to securing a sustainable and competitive future for the UK steel sector".
"While we cannot comment on ongoing negotiations, the Business Secretary considers the success of the steel sector a priority and continues to work closely with industry to achieve this," a spokesperson said.
This is a tricky one for the Chancellor.
British Steel employs thousands of people, and thousands more work for its suppliers.
But making steel is very expensive, especially with energy prices at current levels.
Owner Jingye wants the government to step in.
Ministers fear that if they don't act, parts of the business could be shut down.
Yet giving a wealthy foreign company money to prop up British Steel would not be a good look – the more so as cheap, heavily subsidised imports from China are often cited as having been a key factor in triggering a crisis in British steelmaking in the first place.
So any taxpayers money the government offers won't be for day to day expenditure.
It will be ringfenced for investment in new technology – in particular a new greener, cleaner and cheaper to run blast furnace for Scunthorpe.
It's hoped that will persuade Jingye to stick around and invest in the business – as well as making the plant itself more efficient to run and therefore more viable.
The support package, which was first reported by Sky, would help British Steel build electric arc furnaces in Scunthorpe, North Lincolnshire.
These electric arc furnaces can run on renewable power, and are best used with recycled steel.
Three years ago British Steel was bought out of insolvency by Jingye, which became its third owner in four years.
But the Chinese steel-making giant has recently been pushing for UK taxpayer funding, which it says it needs to keep the firm running.
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