The draft agreement was reached during a meeting in Jerusalem on Monday between Turkish officials, headed by the deputy foreign minister, and Israeli government representatives.
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Prime Minister Benjamin Netanyahu's Office said a final agreement was expected soon. It did not reveal details on Monday's agreement and said "additional clarifications" were needed on a "few issues."
Israel and Turkey are working to mend ties that were ruptured after the 2010 raid, which killed eight Turks and one Turkish-American when Israeli commandos stormed a ship bound for the Hamas-ruled Gaza Strip. Israel maintains a blockade on the territory.
As part of the US-brokered rapprochement, Israel apologized to Turkey for the deaths and agreed to pay compensation to the victims as a step toward restoring ties.
Israel refused to pay the families directly, but agreed to setting up a Turkish government humanitarian fund for compensating the victims' families as well as those wounded. Israel is expected to pay millions of shekels as part of the agreement.
Israel has also demanded that any lawsuits against IDF soldiers and officers would be dropped.
Last month the families of the victims announced they would not drop the lawsuits filed against former Israeli military commanders they hold responsible - even if they are compensated.
According to the reconciliation agreement, an undisclosed sum of money will be transferred to the victims' families. It remains unclear whether the wounded will be paid as well.
In a statement read on board the Mavi Marmara - now anchored in Istanbul - the families said they oppose Turkey opening discussions with Israel until all restrictions on Palestinians are removed.
"While no steps have been taken to lift the severe restrictions or to amend the rights of the Palestinians who are oppressed, these meetings for compensation are an insult to our martyrs," said igdem Topcuoglu, widow of Cetin Topcuoglu.
The relatives vowed not to withdraw complaints filed against four Israeli military officials who are being tried in Turkey in absentia. Turkish prosecutors have demanded life in prison for the officers, although it is unlikely that any sentence could be carried out.
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