Foreign Ministry spokesman Martin Schaefer told journalists at the Federal Press Centre: "A political agreement has been reached among the relevant ministries on a training mission."
"Our goal is now to take the final decision by the cabinet before the Christmas break."
Defense Ministry spokesman Jens Flosdorff said about 100 soldiers would take part in the planned mission that would provide training mainly to peshmerga forces and Iraqi Ezidi and Christian fighters allied with the peshmerga.
The German government began supplying military supplies to Iraqi Kurdish peshmerga troops in September, but Berlin ruled out sending troops to the region to fight ISIL.
Flosdorff underlined that the mission’s goal will be training and it will be carried out in northern Iraq, in coordination with allies and partners.
Despite insistent questions by journalists, Flosdorff did not give any detail about whether the soldiers would be armed or not.
Foreign Ministry spokesman Schaefer said that the Foreign Ministry and the Ministry of Defense were still working on the technical and logistical details, as well as legal aspects of the mission.
The political legitimacy of the decision will be empowered by a mandate from the Parliament, Schaefer said, adding that the plans followed requests by Iraq’s authorities for the training of their forces.
Germany’s Bild newspaper claimed on Thursday that the Defense Ministry was planning to deploy up to 100 armed soldiers in northern Iraq for the training mission.
If approved, it would be the first military deployment of Germany abroad without any NATO or UN Security Council decision.
Germany has been traditionally hesitant in taking part in international military operations mainly because of its Nazi past in World War Two.
Public opinion in the country has been largely against Germany taking any military role in international conflicts.
In recent months German government officials have been advocating a more aggressive foreign policy, supported by military measures, stressing Germany's responsibility for "international peace and stability".