The UK and EU on Monday have agreed on a "large part" of the agreement that will lead to the "orderly withdrawal" of the UK.
Brexit negotiators Michel Barnier and David Davis said they had agreed terms for a transition period, calling the announcement a "decisive step", reports BBC.
But issues still to be resolved include the Northern Ireland border.
The transitional period is set to last from 29 March, 2019 to December 2020, and is intended to smooth the path to a future permanent relationship.
Mr Barnier said there was also an agreement on the rights of 4.5 million EU citizens in the UK and the 1.2 million UK citizens in the EU after Brexit.
The proposed deal would include an emergency "backstop" option to avoid a hard border in Ireland - which Theresa May had opposed - and more work still needed to be done, he said.
Both the UK and the EU hope the terms of an agreement on the transitional period can be signed off by Theresa May's fellow leaders at the EU summit this week.
Mr Barnier said the new draft legal text marks a "decisive step" but added that it was "not the end of the road".
Mr Davis said the move provided further certainty for businesses and included safeguards for fishing quotas during the transition period.
"We must seize the moment and carry on the momentum of the last few weeks," he said.
"The deal today should give us confidence that a good deal for the UK and EU is closer than ever before."
Among other issues the two sides have had to negotiate for the transition period have been what role the European Court of Justice has in the UK, whether the UK can negotiate future trade deals with non-EU countries as well as the continuing issues of Gibraltar post-Brexit.
The current proposal includes an emergency "backstop" to avoid a hard border in Ireland which means Northern Ireland staying in EU customs union and parts of single market if no other solution was found.
The UK and EU hope that if a transition deal is agreed negotiations can focus on what sort of permanent future relationship the UK and EU will have - with the aim of a deal being agreed in the autumn to allow time for EU member states and the UK Parliament to ratify it before Brexit next March.
