The government and MILF have been in talks for a decade about a self-governed territory for Muslims in the largely Catholic country - in hopes of ending a brutal 40-year-old conflict.
Disagreements over the size and wealth of the proposed territory had delayed talks for over a year and were a major stumbling block to an eventual permanent peace deal.
"It's definitely very good news," Jesus Dureza, a presidential adviser, said.
He added that the two sides hoped to sign a formal agreement early next year before moving onto what sort of government the homeland will have.
The two sides have previously signed two agreements on security and rehabilitation in conflict-affected areas.
Muslims in the south of the Philippines have been fighting for their own territory for decades.
The conflict has killed more than 120,000 people and displaced at least 2 million since the late 1960s.