The SPD initially said it wanted to go into opposition but was persuaded to consider a new coalition after German Chancellor Angela Merkel failed to form a three-way government with two smaller parties.
Germany's Social Democrats (SPD) agreed to open exploratory talks on forming a government with Chancellor Angela Merkel, party leader Martin Schulz said, providing a chance to end a rare period of political deadlock in Europe's largest economy.
The decision is a painful about-face for the centre-left party, whose members fear it risks losing its identity and sustaining further electoral defeats if it signs up for another 'grand coalition' with Merkel's conservatives.
The SPD has been Merkel's junior coalition partner since 2013, and was punished by voters in September with its worst election result since World War Two. It initially said it wanted to go into opposition, but was persuaded to consider a new coalition after Merkel failed to form a three-way government with two smaller parties.
Schulz said the party had a responsibility to consider backing the government to contribute to Germany's stability.
But he promised party faithful he would take a new approach to keep the SPD's identity stronger in coalition than previously. He would strive for a "different kind of governing culture" in which ministers communicated more directly with citizens, and demand more healthcare and education spending.
"We won't just keep doing as we've been doing now and there won't be a continuation of the grand coalition we've had until now in the form that we knew it."
For Merkel, winning over the SPD is her only realistic chance of securing a fourth term in office without a new election, after both her conservatives and the SPD suffered punishing losses in September.
SPD leaders hope to sell the about-face to skittish members by forcing Merkel's conservatives to concede a raft of popular worker-friendly measures in exchange for their support, either for a coalition or a minority government.
Conservative leaders welcomed the decision, but urged their partners to work quickly at forming a government, 11 weeks after the vote.
"We need to move at high speed," said Alexander Dobrindt, a senior figure in the CSU, the arch-conservative Bavarian sister party to Merkel's Christian Democratic Union (CDU).
Schulz said talks would not begin in earnest before early January. Party members must still ratify any plan to return to government, meaning a final result could still be months away, even as much of the continent looks to Germany for leadership on euro zone governance reform and security policy.
The SPD's desire to extract meaningful concessions could slow things further, particularly if the parties seek common ground on immigration.
The SPD wants to retain the right for successful asylum seekers to bring their families to Germany, but Merkel's conservative Bavarian allies, fearing defeat in regional elections next year, are equally adamant it should be scrapped.
A poll for ARD television showed that 61 percent of voters would support a renewed "grand coalition" between the conservatives and the SPD.