The UN says three generals loyal to Ivory Coast's besieged President Laurent Gbagbo are negotiating terms for surrender in return for guarantees of safety for him and themselves.
France says negotiators are on the brink of agreeing his departure.
Mr Gbagbo is sheltering with his family in the basement bunker of his residence in the main city, Abidjan.
Troops loyal to Mr Gbagbo's rival, UN-recognised President Alassane Ouattara, say they have surrounded the compound.
The UN says Mr Gbagbo's military and civilian advisers are leaving him.
Three of his generals - the head of the armed forces, the head of the police and the head of the republican guard - have opened negotiations, the UN told the BBC's Andrew Harding, who is on the outskirts of Abidjan.
The UN said the generals had instructed their forces to stop fighting and hand in their weapons to the UN.
'War is over'
Mr Gbagbo's spokesman, Ahoua Don Mello, told the Reuters news agency there were "direct negotiations based on African Union recommendations which said Alassane Ouattara is president".
"They are also negotiating judicial and security conditions for Gbagbo's camp and his relatives," Mr Don Mello said.
"We are very close to convincing him to leave power," French Foreign Minister Alain Juppe told the National Assembly in Paris.
However, Mr Gbagbo denied he was ready to surrender. In a telephone interview with the French LCI television channel, he again insisted Mr Ouattara did not win the election in November.
"The army has called for the suspension of hostilities... and it is currently discussing the conditions of a ceasefire with the other forces on the ground, but on a political level, no decision has yet been taken," he told LCI.
The deputy commander of the pro-Ouattara forces, Cisse Sindou, told the BBC's Focus on Africa programme: "We won the battle. Gbagbo is with the French. He is negotiating how to leave the country."
Mr Gbagbo had refused to leave office even though the Ivorian election commission declared him the loser of November's run-off vote, and the UN certified the result.
Forces loyal to Mr Ouattara, a former International Monetary Fund economist, began a dramatic military offensive last week, sweeping in from the north and west.
US President Barack Obama has condemned the violence, saying it could have been averted if Mr Gbagbo had respected the election result.
"To end this violence and prevent more bloodshed, former President Gbagbo must stand down immediately," Mr Obama said in a statement.
Our correspondent, Andrew Harding, says news of the surrender talks has been circulating rapidly.
It has not been greeted with excitement but with a weary sense of relief, he says, as people ask why Mr Gbagbo had to put them through so much war and destruction.
Many civilians remain trapped in their homes. Food, water and electricity are scarce in the city of about four million people after days of fighting.
Mr Gbagbo's army chief, Gen Philippe Mangou, told the AFP news agency his troops had stopped fighting.
"Following the bombardment by the French forces on some of our positions and certain strategic points in the city of Abidjan, we have ourselves stopped fighting and have asked the general commanding [Unoci] for a ceasefire," Gen Mangou said.
Gen Mangou deserted last week, but was said to have returned to the Gbagbo fold on Monday after an apparent change of heart.
Meanwhile, UN humanitarian chief Baroness (Valerie) Amos has visited the town of Duekoue, where hundreds of people died after it was taken by pro-Ouattara forces last week.
Each side has blamed the other for the killings, which the International Committee of the Red Cross says claimed at least 800 lives.
Baroness Amos said investigators found at least 200 bodies in a single mass grave, adding that it was not clear who was responsible for the deaths.
On Monday, UN and French helicopters attacked several targets around Mr Gbagbo's compound. The UN said the raids were to stop attacks on civilians.
Patrick Achi, a spokesman for Mr Ouattara, told the BBC earlier that if Mr Gbagbo were captured, he would be arrested and "brought to justice".