Labour leader Pat Rabbitte has said the level of support from the party's national executive is a clear endorsement of his preference for a pre-election pact with Fine Gael.
Meanwhile, Fine Gael leader Enda Kenny has said the PDs could be an option as a coalition partner.
On Saturday, Labour's executive voted by 18 votes to nine to support a motion to allow Mr Rabbitte to enter a pre-election pact with non-Government parties, including voting transfer agreements. This motion is to go before Labour's national conference in Tralee next month for a decision.
Despite Saturday's vote, Mr Rabbitte's pre-election proposal is still facing opposition from sections of the party, including Labour trade union affiliate the ATGWU, which described the pact as "disastrous".
The union and other party members have tabled alternative motions to be voted on during the conference.
Mr Rabbitte said, despite opposition within the party, he was confident the motion would be adopted next month, especially given the level of support it received from the executive.
"I think decision is very clear," said Mr Rabbitte, who felt most Labour Party members agreed with his position. "I've had the view that what people will be looking for after almost 20 years of unbroken Fianna Fáil rule will be for an alternative. They will be looking for choice."
Mr Rabbitte rejected suggestions that the internal and public debate going on was damaging the party. "It's better to have this debate now, rather than two months before an election."
Following the decision, ATGWU's regional organiser Mick O'Reilly said the union was strongly opposed to the pre-election pact, and would be putting forward another election strategy not based on alternative coalitions.
"The last time Labour joined Fine Gael in a coalition it lost half its parliamentary seats, and Democratic Left went out of existence. The last time we left the door open to Fianna Fáil we failed to gain any seats."
Speaking in Dublin yesterday, Fine Gael leader Enda Kenny welcomed the Labour executive's vote, but said he respected that a final decision had to be made next month.
"If the party vote for it, and I hope they do, we will sit down together to work on building alternative proposals which we will put to the electorate well before the next general election."
On TV3's The Political Party yesterday, he also said the PDs could be a possible coalition partner after the next election. "Well, I think if the PDs were to change their tune in some elements of their policy decisions, we'd certainly be prepared to talk to them."
Mr Kenny was reacting to comments a fortnight ago by PD leader Mary Harney about Labour and Fine Gael being potential coalition partners.
"I respect that coming from the Tánaiste, but obviously the PDs, as an element of Government, have failed to deliver in terms of public reform, public services and in the areas that concern people every day, be it in health or transport or education."
Mr Rabbitte dismissed the Tánaiste's comments as "political opportunism" at a time that she was at odds with Fianna Fáil on various issues.