Kosovo will be allowed to separate from Serbia and use its own national symbols under proposals to end its limbo status drawn up by the UN's special envoy.
Martti Ahtisaari's plan does not mention the word "independence", but that is virtually what is on offer, Western diplomats told the BBC.
Mr Ahtisaari will present his plan in Serbia later on Friday.
The UN has administered Kosovo since a Nato bombing campaign forced Serbian troops to withdraw in 1999.
Talks to determine Kosovo's final status have been continuing for years without the two sides coming to agreement.
Ethnic Albanians, who make up 90% of the province's two million people, overwhelmingly want to break away from Serbia.
But Serbs regard the province - which is still officially part of Serbia - as the cradle of their culture, and oppose any solution that would lead to its independence.
Mr Ahtisaari's plan, however, amounts to "independence, subject to international supervision", said one Western diplomat, who wished to remain unnamed.
Kosovo would be allowed its own national symbols, including a flag and anthem, and to apply for membership of international organisations like the United Nations.
Serb rights
It would not be unconditional independence, however.
An "international community representative" would be appointed, with powers to intervene if Kosovo tries to go further than the plan allows, while Nato and EU forces would remain in military and policing roles.
Kosovo could not be partitioned between Serbian and ethnic Albanian areas, nor would Kosovo be allowed to join any other state - implicitly ruling out the creation of a "greater Albania".
The interests of Kosovo's Serbs, including the Serbian Orthodox Church and the language, would be explicitly protected, and there would be guaranteed Serb representation in parliament, the police and civil service.
Mr Ahtisaari will present his plan first to Serbian officials in Belgrade and then to ethnic-Albanian leaders in Kosovo itself.
The UN Security Council will have the final say on whether to adopt the plan.
Serbia has said repeatedly that it would not accept any loss of sovereignty over Kosovo, and Slobodan Samardzic, a Serbian negotiator, rejected Mr Ahtisaari's expected conclusions.
"Anything that... violates Serbia's internal laws, cannot be a subject to negotiation," he told state-run Serbian TV.
Kosovo Albanians expressed nervousness ahead of the formal announcement.
Saime Maliqi, 47, who lives in Kosovo's capital Pristina, said: "All of us are waiting desperately for Friday to improve our lives."
Hasan Bytyqi, an ethnic-Albanian merchant, told Associated Press: "To be honest, I am a bit scared of what we are coming to."
Aleksandar Spasic, a 76-year-old Kosovan Serb, said: "I don't believe that Ahtisaari will help Kosovo Serbs a lot. But I will never leave Kosovo... I was born here and this is where I want to die."
Photo caption
Ethnic Albanians in Kosovo