David Cameron could confirm an inquiry into British complicity in the torture of terror suspects later.
The prime minister is understood to have agreed the terms to an inquiry led by a judge, it has been widely reported.
Foreign secretary William Hague had already called for a "judge-led" inquiry to investigate the allegations.
"As the foreign secretary has said, there are important issues to be considered," a Downing Street spokesperson said.
"An announcement will be made in due course."
The BBC reported the inquiry would make compensation available to detainees who had been tortured with the knowledge of British intelligence officials.
Broad suspicion of British complicity in the 'extraordinary rendition' process had been building for years before the case of ex-Guantanamo Bay detainee Binyam Mohamed threw the issue into sharper relief.
His lawyers claimed an intelligence agent known as witness B referred to guidance issued by his superiors while being cross-examined.
Civil liberties campaign group Liberty's director Shami Chakrabarti called for the investigation to be "independent, judge-led and have broad powers to call evidence and make as much as possible publicly available".
"Only this kind of inquiry can end the slow bleed of embarrassing revelation and expensive litigation and draw a line under this shameful business once and for all," she added.
Mr Cameron will come under pressure to make the terms of the inquiry known when he appears before MPs this lunch time for the weekly prime minister's questions session.