Yemen's government offered to resign within a month and to review an unpopular decision to cut fuel subsidies in an attempt to bring an end to massive protests by the Houthi movement.
The Saturday development came after tens of thousands of Yemenis massed in the capital Sanaa on Friday in another major protest rally called by the Houthis to demand the government's resignation and a reversal of the subsidy cuts, Al-Alam reported.
The rally came at the end of a week of massive protest marches that have piled pressure on President Abd-Rabbu Mansour Hadi, who has struggled to keep order in the US-sponsored country which borders major oil exporter and another major US ally Saudi Arabia.
According to a Reuters-cited source from Yemen's presidential committee, Yemeni authorities had handed to the Houthis a draft proposal that includes an offer to form a new government within a month and to set up an economic committee to review the fuel subsidy issue.
"This proposal will take effect in exchange for the Houthis removing their camps from Sanaa; they can either respond or leave the capital if negotiations fail," said the source.
There was no immediate response to the offer from the Houthis, who have been fighting for years for more power for their Zaydi Shiite Muslim sect in North Yemen.
On Friday, the movement set up tents near the interior, telecommunications and electricity ministries in a side street that leads to Sanaa's airport, saying they would stay until their demands were met.
Yemenis are unhappy about the government's decision in late July to cut energy subsidies to ease the burden on its budget deficit, a move which led to a rise in fuel prices.
The government spent nearly $3 billion on subsidies last year, nearly a third of state revenues.
A previous attempt by the government to cut subsidies in 2005 led to unrest that left about 20 people dead and more than 200 wounded. The reform was eventually cancelled.