Student negotiators achieved an apparent breakthrough on Tuesday morning, as a deal was proposed to allow them to carry on towards Rangoon.
Separated by barbed wire, the two sides have stared each other down for over a week.
Police have blockaded students into the town, refusing to allow them onwards to the former capital.
On Tuesday, Pegu Division’s Border Affairs department agreed to let the students continue their demonstration.
Should students accept the terms, the group of two hundred would be free to march a short distance to the local highway, before boarding cars to Rangoon.