Under the agreement, taxes on petrol and diesel would be cut to provide relief of around 17 euro cents (0.2 U.S. dollars) per liter, similar to a temporary reduction introduced in May and June.
The tax relief would cost around 2.5 billion euros (2.9 billion dollars) in total, the country's public broadcaster ARD reported, citing government sources. The reduction is expected to run until the end of 2026, although it remains unclear when it will take effect.
The government also plans to introduce a cap on petrol and diesel prices, although details on its design and timing have yet to be announced, the report said, Xinhua reported.
Fuel Prices in Germany have repeatedly hit record highs as the conflict in the Middle East pushes up oil costs. Chancellor Friedrich Merz said earlier this week that the government would take action to ease the burden, but did not specify what measures would be introduced.
Higher energy costs have also added to inflationary pressure. Germany's inflation rose to 2.9 percent in August from 2.8 percent in July, while energy prices jumped 10.5 percent year-on-year, their sharpest increase in more than three years, official data showed.