Minister for Justice Michael McDowell is to drop proposals for a new cafe-bar licence in favour of reforming restaurant licences following discussions with Taoiseach Bertie Ahern.
The issue prompted an attack by Progressive Democrats senator Tom Morrissey on the elements within Fianna Fáil which opposed the reform as being "in the pockets of vested interests".
He also warned that the lifetime of the coalition Government could be shortened by further attempts to block reforms by the PDs.
Mr McDowell will outline his new plans for liquor licence reforms to a meeting of the Fianna Fáil parliamentary party tomorrow evening.
The amended proposals, which were discussed by the Taoiseach and Mr McDowell last Thursday, will enable restaurants to obtain full drinks licences. Many are currently confined to selling wine.
Mr McDowell was unavailable for comment yesterday, but he is believed to reject suggestions that it is an embarrassing climbdown on the cafe-bar plan, which was originally proposed by the Commission on Liquor Licensing.
The compromise comes ahead of a private members motion in the Dáil tomorrow by Fine Gael against the cafe-bar idea, which had been expected to prompt a number of Fianna Fáil TDs to speak against Mr McDowell's proposals.
Forty three members of the party had already signed up to an internal party motion against cafe bars.
Senator Tom Morrissey attacked the approach of Fianna Fáil backbenchers towards proposed reforms being pursued by the Tánaiste and Minister for Health Mary Harney and Mr McDowell in their respective areas.
"If there's resistance towards reform, well then the lifetime of this Government will be shorter than 2007," he told The Irish Times.
"Some people in Fianna Fáil are more concerned about where you drink than how much you drink," Mr Morrissey said, claiming the opposition to cafe bars was prompted by concerns for publicans.
"Some people in Fianna Fáil stand for nothing, believe in nothing except one thing called power," he said. He claimed that some of his Fianna Fáil colleagues were "in the pockets of everybody. They work for vested interests".
Mr Morrissey's comments prompted an angry reaction from Fianna Fáil backbenchers behind the original motion, including Kilkenny TD John McGuinness, who described Mr Morrissey's comments as outrageous. "I act for no vested interest and I think I'm someone standing up for decency in Fianna Fáil, and I'm entitled to express my view about cafe bars," he said.