The US is set to remove dissident Iranian group Mujahideen-e Khalq from its terror blacklist, officials say.
Secretary of State Hillary Clinton has sent a classified opinion to Congress and a decision is expected to be announced in the following days.
A state department spokeswoman has not confirmed what the opinion contains, but US congressmen welcomed the expected decision in favour of MEK.
It says its presence on the list puts members living in Iraq under threat.
A US appeals court had given Mrs Clinton until 1 October to give her recommendation.
The MEK, also known as the People's Mujahideen Organisation of Iran (PMOI) led a guerrilla campaign against the US-backed Shah of Iran during the 1970s and also opposed Iran's clerical leaders who replaced the Shah.
It was given refuge in Iraq by former leader Saddam Hussein but has fallen out of favour with Iraq's new Shia-dominated leadership.
Members of the group have been based at a refugee camp in Iraq but Baghdad is taking steps to expel them.
The group was listed as a foreign terrorist organisation by the United States in 1997. But the MEK has insisted that it has renounced violence and has lobbied fiercely in Washington to gain congressional support for its delisting.
Those backing the MEK have staged a long campaign for the group to be removed - a move that would enable the MEK itself officially to lobby Congress.
Opponents have argued that the government should not bow to the group, saying ample evidence remains to justify keeping them on the terror list.
On Friday, state department spokeswoman Victoria Nuland confirmed that that Mrs Clinton had prepared her recommendation.
"I'm not in a position to confirm the contents of this because it's classified, but we anticipate being able to make a public announcement about it sometime before 1 October," Ms Nuland said.
Republican Congressman Ted Poe, a member of the House Foreign Affairs committee who has led calls in support of the MEK, said Mrs Clinton's "expected decision to delist" the group was "long overdue".
"The MEK long ago renounced violence, and in recent years, has been actively working with US intelligence agencies to get information on activities inside Iran," Mr Poe said in a statement.
Another lawmaker, Dana Rohrabacher, also said: "I am very happy to learn the state department has agreed to delist the Mujahideen, or MEK, from the Foreign Terrorist Organizations List.
"The MEK are Iranians who desire a secular, peaceful, and democratic government."
Britain removed the group of its terror list in 2008, followed by the European Union in 2009.