NBC denied a TMZ report that said a deal was in place to return Leno to Tonight, but an Entertainment Weekly source was optimistic about the talks and a possible end to the time-shift disaster.
"We would like to see it resolved by the weekend," the source told EW. "It's possible."
A source also told The Daily Beast that a settlement has been outlined that would see O'Brien leave NBC and the network make an as-yet unspecified payment.
O'Brien would then be free to appear elsewhere on television well before his contract expires.
According to the source, the resolution to the battle came down primarily to the size of the check that NBC would write to O'Brien.
It also seems certain that the settlement will involve some sort of compromise that prevents O'Brien from immediately jumping to the competition.
Meanwhile, Dick Ebersol, chairman of NBC Universal Sports, came to Leno's defense and cited O'Brien's ratings as the reason for moving Leno out of primetime.
Referring to the pointed jokes made this week by O'Brien and David Letterman, Ebersol told The New York Times it was "chicken-hearted and gutless to blame a guy you couldn't beat in the ratings."
He added that "what this is really all about is an astounding failure by Conan."
Ebersol said he had met personally with the host three weeks before he stepped behind the Tonight desk for the first time to urge him to take steps to expand the appeal he had built up in his Late Night years.
O'Brien's camp, while steering clear of commenting on Ebersol's criticism, confirmed the executive had met with the star and discussed potential changes in the show, the NYT says.
"I like Conan enormously personally," Ebersol said. "He was just stubborn about not being willing to broaden the appeal of his show."