The left-wing Vetevendosje (Self-Determination) and center-right Democratic League of Kosovo (LDK) won most of the seats in the October election.
“Now we have agreements. We will govern together,” Vetevendosje head and prime minister-designate Albin Kurti posted on Facebook.
The snap election was called after Ramush Haradinaj resigned as prime minister in July as he was summoned to be questioned at a war crimes court in The Hague.
In October, Vetevendosje and LDK won 29 and 28 seats respectively in the 120-member assembly.
They inflicted a historic defeat on the PDK party, led by ex-guerrilla commanders who have dominated Kosovo since it declared independence.
But the election was followed by months of bargaining between the two camps over government posts rather than ideological differences.
The deal is to be formally approved later Sunday by the two parties decision-making bodies, which is an almost certain outcome.
Parliament is to vote on Kurti’s cabinet on Monday.
The new coalition will also include parties representing minorities and will have together a required majority of 61 MPs.