Israeli media are reporting that Mahmoud Abbas, the Palestinian president, and Binyamin Netanyahu, Israel's prime minister, have agreed to place a one-year deadline on the talks.
Many other details of the negotiations are still unclear, however, particularly whether the US has provided guarantees for either side.
The Arab League endorsed the talks in principle last month, but only subject to certain "measures and conditions". Amr Moussa, the Arab League secretary-general, said direct talks should be preceded by "written guarantees" from the United States.
Netanyahu, however, has said that he is willing to resume direct talks "without preconditions".
"I don't think there's any common Israeli and Palestinian ground as yet," Daniel Levy, a former Israeli negotiator, told Al Jazeera. "There will be deep scepticism pretty much everywhere ... I think we're going to hear something rather vague, something open to more than one interpretation."
Settlements at issue
Ismail Haniya, the Hamas leader in Gaza, criticised the expected announcement. Speaking after Friday prayers in Gaza, he said "nothing has been achieved" to warrant direct talks with Israel.
Haniyeh also said Palestinians should concentrate first on national reconciliation. The Hamas and Fatah movements have been estranged for years, and Egyptian attempts at mediation over the last few months have produced little progress.
One immediate obstacle for the negotiations could be Israeli settlements in occupied East Jerusalem and the West Bank.
talks about talks
December 2008: Palestinians suspend talks after Israel launches Gaza war. March 2010: Abbas agrees to indirect talks, then freezes them over settlements. May 2010: Indirect talks begin with a four-month timeframe.August 2010: US expected to announce resumption of direct talks.September 2010: West Bank settlement freeze scheduled to end on September 26.
Netanyahu imposed a 10-month halt on settlement expansion in the West Bank last November. The freeze did not include East Jerusalem, and it has been routinely violated in the West Bank: The liberal Israeli group Peace Now documented 492 violations of the freeze in a report issued earlier this month.
The expansion halt is due to expire altogether on September 26, and major new construction could heighten the pressure on Abbas to back out of the talks.
Netanyahu is under pressure from the US to extend it, but he has warned repeatedly that an extension could cause his right-wing government to collapse.
The issue of settlements is deeply divisive in Israel, where numerous polls have found public opinion almost evenly split on Netanyahu's freeze.
The most recent survey, a July poll from the Jerusalem Media and Communications Centre, found that 52 per cent of Israelis favour restarting construction when the freeze ends; 42 per cent supported extending the moratorium.
Al Jazeera's Nick Spicer, reporting from Washington DC, said the impending end of the Israeli settlement freeze had concentrated American efforts on restarting the talks.
"What really put pressure on the resumption of direct talks was President Obama's fear that the expiration of the moratorium on building new settlements, that expires on September 26, would completely break down what was left of the peace process," he said.
The Palestinian Authority broke off direct talks with Israel in December 2008, when Israel launched a three-week war in the Gaza Strip. Obama has spent the last 18 months trying to cajole both sides into restarting a dialogue.
He pushed earlier this year for "proximity talks," indirect negotiations moderated by George Mitchell, Obama's Middle East evoy.
Abbas and the Arab League agreed in March to begin indirect talks, which were almost immediately postponed following Israel's announcement of 1,600 new homes in the illegal East Jerusalem settlement of Ramat Shlomo.
The negotiations finally began in May, and Abbas said he would give them four months to show progress.