Tottenham Hotspur are on the verge of abandoning their legal battle to take over the 2012 Olympic Stadium after the Games, BBC London can reveal.
The club was due in the High Court on Wednesday seeking a judicial review over the Olympic Park Legacy Company's choice to hand the stadium to West Ham.
But Spurs were involved in intense negotiations with the office of London Mayor Boris Johnson on Tuesday night.
They are close to striking a deal to build a new stadium in north London.
"If these negotiations are concluded successfully as expected, the appeal will be dropped," a senior government source told the BBC.
This month's riots in north London have played a major role in persuading the club that they need to stay in Tottenham.
Spurs have been looking for government and mayoral support for their plans for a bigger ground at a site in Northumberland Park, near White Hart Lane, for several months.
Businesses in the area would have been hit hard if the club had moved away. The club realises that it is an integral part of rebuilding the area after the riots.
Any deal with the mayor is expected to involved public funding, which Mr Johnson has already said he supports.
Spurs had plans to develop the Northumberland Park site approved by the mayor in 2010 but escalating costs turned their focus towards taking over the Olympic Stadium in Stratford.
Some fans staged a protest about the proposed move to east London, saying they wanted their club to remain in Tottenham.
Spurs have played at White Hart Lane since 1899.
Tottenham had already applied to the government's Regional Growth Fund for a grant to cover costs which would be associated with moving to Northumberland Park.
They include upgrading public transport and providing training and employment opportunities for local people.
Tottenham were struggling to win their legal battle with Olympic chiefs. A High Court judge had already turned down the club's first appeal for a judicial review.
If the club now drops the second appeal, West Ham can go ahead with their plans to move into the Olympic Stadium by 2014.
This would secure the legacy of the most high-profile venue at the Olympic Park and boost London's hopes of staging the 2017 World Athletics Championships.