The Spanish Socialist Party (PSOE) in Castilla La Mancha has invited Podemos to enter into coalition in order to get a budget approved in the regional parliament, the First Minister, Emiliano García-Page, announced on Thursday.
This will be the first time since the appearance of Podemos at the 2014 European elections that the party has agreed to govern with the PSOE.
García-Page said: "This is a sincere, frank plan designed to offer peace of mind and guarantees".
Podemos is to consult grassroots members in the central region—home to two million Spaniards—about the deal, but is expected to be given a Deputy First Minister post and responsibility for social spending.
"We are in politics to change things", tweeted Pablo Iglesias: "Sometimes, only governing guarantee change. Now the grassroots will decide".
Earlier in the week, the Popular Party in the region had said Mr. García-Page should call early elections if he was incapable of forming a government or passing a budget.
At the 2015 regional elections, no party won a majority in the 33-seat regional chamber, after which the PSOE formed a minority government, supported in parliament by Podemos.
Despite that support, in April, Podemos voted with the PP against the PSOE's budget after its amendments were rejected, saying the plan was a continuation of old political practices that did not offer change, and that the socialists were "morally bankrupt".
Mr. García-Page, a senior regional figure in the Spanish Socialist Party, was a staunch supporter of the neighbouring Andalusian First Minister, Susana Díaz, in the recent national leadership election in the PSOE, against Pedro Sánchez.
Mr. Sánchez won that race.
El Mundo reported on Saturday morning that he had phoned Podemos leader Pablo Iglesias to seal the deal, at the behest of the regional socialist leader.
On Friday in a radio interview, Mr. García-Page rejected the notion that his new regional deal might work at a national level, and said he hoped Podemos members in the region would not reject it.
If that failed, he said, there was no Plan B: "We will have to take a look at the situation".