The deal, which Congress has not yet voted on, means that funding for the Department of Homeland Security is separated from the rest of the proposed spending package - which can then be passed in time for Friday's deadline.
Democrats have previously demanded changes to the immigration agency ICE in order to approve the budget, but are now choosing to temporarily extend the department's funding - which includes ICE - for two weeks to allow continued negotiations.
President Donald Trump said he supports the deal.
At the same time, the risk of another short shutdown remains, AFP reports. If the budget is passed in the Senate, it will also need approval in the House of Representatives, which does not meet until Monday - more than two days after the Friday evening deadline.
Last fall, the U.S. government was shut down for just over 40 days when Democrats and Republicans in Congress failed to agree on the federal budget.
