Each of the 270 bereaved families could receive up to $10 million, depending on how quickly the US removes Libya from its list of nations that support terrorism.
The trigger for the Libyan admission, long demanded by the United States, appears to be the finalization of a bank account in Europe to hold some $2.7 billion that Libya has agreed to pay in compensation.
James Kreindler, a lawyer for the families of many of the victims, told his clients last month that a tentative date of 14 August had been set to sign the agreement.
The first $4 million would be paid out when UN sanctions are lifted.
A further $4 million would be delivered to each family once US sanctions were lifted, with the final $2 million payments to be made if the US State Department removed Libya from its list within eight months.
Lawyers and diplomats hope to sign an agreement next week and deposit the money in an escrow account at Switzerland's Bank of International Settlements, sources familiar with the two-year-long negotiations told the daily American newspaper.
Once the documents are signed, Tripoli would notify the UN Security Council that it assumes responsibility for the bombing.
The United Nations, in turn, would lift its economic sanctions and Libya would begin bargaining with the US government.
If Washington does not take these steps within eight months of UN sanctions ending, Libya would pay only $1 million more, bringing the total compensation to $5 million per victim.
After April 1992, many Libyans suffered when UN-sanctions suffocated the country for seven years as a whole nation was made collectively responsible for the crash of PanAm 103.
Sanctions were suspended, but not lifted, in 1999 after Libya agreed to turn over two Libyan suspects. One was convicted by a special Scottish court sitting in the Netherlands.
A month after the conviction, Qadhafi told journalists he categorically refused to compensate the victims of Lockerbie in exchange for a lifting of sanctions, saying Libya was not obliged to accept compromises or make concessions.
But Washington has insisted that to have sanctions permanently removed, Libya must pay the compensation, as well as accept responsibility and agree to cooperate in further investigations - issues it could address in a letter to the Security Council.