The Treasury has agreed to fund pay reforms from the Pounds 1.2 billion set aside in the Government's spending review for service development.
Concern at the crisis in teacher recruitment has prompted ministers to put together emergency measures to be announced in the next few weeks.
Education minister Estelle Morris said this week: "It is impossible to underestimate the importance of this document. This is a one-off chance to change the structure of the profession and reward good teachers."
Ministers are to meet teacher union leaders at next month's Labour conference and will be keen to stress that they do not have in mind any crude system of payment by results. However, it is likely that extra pay will be linked to improvements in standards.
The new deal for the profession is likely to require changes in the teachers' contract, which sets out the number of working days for which teachers are paid. Ministers appear confident that teachers are more willing than in the past to accept that there should be a link between pay and performance. There is also an acceptance by them that teachers require additional administrative and classroom support.
Ms Morris says the focus will be on creating rewards and working conditions that will attract good graduates.