“A pathway to a deal” on new terms for Britain’s membership of the EU has been found by European leaders, Prime Minister David Cameron has said.
“Good progress” had been made at the EU summit in Brussels, but it would be “hard work” to finalise terms by the proposed deadline in February, he said.
He is demanding change on four issues including stopping in-work benefits for EU migrants in the UK for four years.
German Chancellor Angela Merkel said the leaders “all want a compromise”.
Mr Cameron wants to get a new deal before putting the question of the UK’s membership of the EU to an in-out referendum of British people by the end of 2017.
As well as controls on migrant benefits, he is also demanding protection for countries outside the eurozone on financial matters, measures to boost competitiveness and an exemption for the UK from the drive towards an “ever-closer union”.
BBC political correspondent Alex Forsyth said she understood a number of ideas were “kicked around the dinner table” by the EU’s 28 heads of state on Thursday night.
There was suggestion among them that a legally binding agreement – and potentially treaty change down the line – would be possible, she said.
However, officials only had a very short time frame in which to hammer out the technical details by February, she added.
Official conclusions published by the European Council said members had agreed “to work closely together to find mutually satisfactory solutions in all the four areas”.
Late on Thursday evening, Mr Cameron emerged from the talks and told reporters a “big step forward” had been taken for a “better deal” for Britain.
“There’s still a lot of hard work to be done but there is a path through this,” he said.
The prime minister added: “In terms of welfare, no, I haven’t put any other proposals on the table – I have put my four-year proposal on the table and it remains on the table.”
“Nothing is certain in life or in Brussels but there is a pathway to a deal in February,” he said.
Treaty change ‘possible’
European Council president Donald Tusk said Mr Cameron had set out his position, particularly on benefits and free movement, and while other leaders had voiced concern they were willing to look for compromises.
“Building on this positive debate we agreed to work together to find solutions in all four baskets raised by Prime Minister Cameron,” he said.
German Chancellor Angela Merkel said: “I am optimistic because we all want a compromise. But work on substance needs to be done. Treaty change might be possible. Not now, but perhaps later.”
French President Francois Hollande said there could be adjustments over Mr Cameron’s demands, but EU rules and principles must be respected.
European Commission president Jean-Claude Juncker warned that all four of Mr Cameron’s demands were difficult, and intensive negotiations were needed before February.
He said: “I’d like to warn you of the illusory impression that there are three easy questions and one tricky one.
“There are four tricky questions, each one covers further questions and we have to consider all of those until February.”
UKIP leader Nigel Farage, who wants Britain out of the EU, said Mr Cameron “came, saw, and got hammered”.
He added: “All he got as a result was a meaningless two sentences in a communique. He was told to come back in February when I suspect he will probably get a few minor concessions.”