Israel had begun handing out notices to male African migrants in February, warning them that they had two months to leave the country or face jail. These migrants were offered US$3500 to relocate to an unnamed "third country" - widely reported to be Uganda or Rwanda - or return to their home country.
Advocacy groups working on behalf of the migrants had challenged the deportation plans in Israel's high court, securing a temporary freeze on the plan on March 15.
Moves to expel African asylum seekers were largely popular with the right-wing Government's base, which viewed them as economic migrants who had entered the country illegally in search of work.
But liberal Israelis argued that many of these migrants would face persecution if they returned home, with some comparing the asylum seekers' plight to that facing Jews fleeing Nazi Germany.
The Israeli Government pushed back against critics, in particular those who labelled the deportation policy racist, noting that thousands of Ukrainian and Georgian migrants were deported last year without being offered the relocation payment that was being offered to migrants from Sudan and Eritrea.
In its statement today, Netanyahu's office noted legal constraints and political difficulties with the proposed third-country destinations for the migrants as factors in its move toward a compromise.
The statement also said that the new agreement would create a special body to implement a "rehabilitation plan" for neighbourhoods in southern Tel Aviv.
The Movement to Halt the Deportation of Asylum Seekers, a local advocacy group, said that the new plan marked an "unprecedented achievement" for the thousands of Israelis who had rallied in support of migrants over the past few months and that it offered Israel an opportunity to make amends and forge a more responsible policy for the asylum seekers remaining in the country.