The move marks a U-turn for SPD leader Martin Schulz, who had previously ruled out any participation in a future government after he lost to Angela Merkel’s conservative Union bloc in the September vote.
Germany's Social Democrats bowed to pressure from across the political spectrum on Friday to help form a new government led by Chancellor Angela Merkel, but pledged that party members would have final say on any deal.
The turnabout by the centre-left party, which had said it would go into opposition after suffering its worst result in 70 years in a September election, could help avert a disruptive repeat election in Europe's economic and political powerhouse.
SPD leader Martin Schulz told a news conference that party leadership had reached the decision out of a sense of responsibility to Germany and Europe after Sunday's collapse of talks aimed at forming a three-way coalition.
TRT World's Ira Spitzer reports from Berlin.
"There is nothing automatic about the direction we are moving in," Schulz said.
"If a discussion results in us deciding to participate in any form whatsoever in the formation of a government, we will put it to a vote of party members."
Backing for a new government could come in various forms other than a coalition, including a formal agreement not to obstruct a Merkel-led minority government or an informal agreement to tolerate it.
Talks next week
Schulz will hold joint talks with Merkel and Horst Seehofer, leader of her Christian Democrats' Bavarian arch-conservative sister party, for talks hosted by President Frank-Walter Steinmeier next week.
Steinmeier, once an SPD foreign minister, urged his former party to go back on its pledge to go into opposition, having made clear that he saw fresh elections as a last resort.
The SPD have governed in coalition under Merkel since 2013, and that government remains in place in a caretaker role.
Merkel is facing the biggest political deadlock of her career since efforts to forge a three-way coalition with the pro-business Free Democrats (FDP) and ecologist Greens collapsed last weekend.
That has raised worries across Europe of prolonged uncertainty in the world's fourth biggest economy.