Government officials have formally recommended granting Huawei a limited role within Britain's future 5G infrastructure, according to the Reuters news agency.
The recommendation appears to reassert a decision reportedly made by Theresa May last year, but comes despite repeated pressures from the US to completely prohibit the use of any telecommunications equipment produced by the Chinese company in the UK.
Citing two people with knowledge of the matter, Reuters reported that the recommendation was made at a meeting of officials from senior government departments and security agencies on Wednesday.
The ultimate decision on the matter will be made at a meeting of the National Security Council next week, according to Reuters sources.
A spokesperson for Downing Street said: "The work on the issue of high-risk vendors in the 5G network remains ongoing and when it is completed it will be announced to parliament."
Controversy has stalked the decision since Mrs May was first reported to have given the green light for Huawei to provide "non-core" infrastructure last year.
A leak regarding her decision led to the sacking of then defence secretary Gavin Williamson, who denied being the source of the information.
Mrs May's resignation as prime minister and the general election added months of delay to the government making an official decision.
During this time the US has repeatedly stressed it would reassess its intelligence sharing relationship with the UK if Huawei was given any role at all in Britain's infrastructure.
Regarding the decision, Boris Johnson was warned not to "let the fox into the hen house" by Tom Tugendhat, who was chair of the Foreign Affairs Select Committee in the last parliament.
Mr Tugendhat told Kay Burley@Breakfast that the telecoms firm was "integrally part of the Chinese state" while senior US officials described suggestions the UK would grant the company some form of access as "nothing short of madness".
But these warnings have not been unanimous, and almost every major telco in the UK has warned of a severe disruption to their businesses if Huawei was to face a complete ban.
Sir Andrew Parker, the head of MI5 which is responsible for Britain's counter-espionage work, said he had "no reason to think" that the UK would lose out on intelligence relationships as a result of the decision.
Victor Zhang 'very confident' UK will choose Huawei
Huawei's most senior executive in the UK told Sky News in December he was optimistic the UK would not exclude the company from the rollout of 5G services.
Victor Zhang, Huawei's president for global government affairs, said: "I am very confident that the UK will choose Huawei because the UK always takes an evidence and facts-based approach and that the decision-making will be based on the nation's long-term interest and to satisfy society and the benefit of all consumers.
"Huawei have been here in the UK for more than 18 years and trust has been built with our customers and with the UK government through our openness and transparency."
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