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"There is progress on how the lifespan extension of nuclear power plants can be examined on an individual, differentiated basis," the official said, referring to proposals to base the extension on the plants' age and safety standards.
Merkel is meeting senior government officials to end a dispute over the lifespan of the country's 17 active nuclear power stations, due to be closed by 2021 at the latest under current legislation.
The topic has sown division in her ruling coalition and has pitted operators against German environmentalists, some 1 000 of whom staged a protest outside the chancellery on Sunday.
On the table are extensions ranging from 10 to 15 years, with Economy Minister Rainer Bruederle wanting the top end of the range while Environment Minister Norbert Roettgen seeks a shorter extension.
Before the meeting, Bruederle said he was confident the government would come to a quick and intelligent decision, just as German utility RWE's chief executive spoke out for a 20-year extension - beyond the maximum timeframe mentioned by Merkel.
The final agreement will be the cornerstone of Merkel's broader energy strategy, to be decided later this month, which will aim to map out the country's future energy supply.
Merkel has invested much political capital in the strategy, which must be worked out smoothly if she is to reverse her government's slump in the polls in time for a string of important elections early next year.
That will not be easy, as the nuclear subject is a political minefield in Germany, where the public is sceptical about safety risks and unresolved questions about nuclear waste storage.
Sunday's meeting may also bring a solution to the form and frequency of levying a so-called nuclear fuel element tax of €2.3bn (about $3.1bn) a year, which the government wants to boost budgets, but which utilities oppose.
