The far-right, eurosceptic League's chief whip in the Senate, Gianmarco Centinaio said talks on a government between his party and the populist Five-Star Movement on Tuesday were making good progress.
"We are working well," Centinaio said as he left the Italian parliament building at lunchtime.
Tuesday's negotiations on a German-style 'contract of government' are centred on immigration, security, public works projects, a flat tax and relations with the European Union.
Five-Star and the League are "a significant distance apart" on immigration, League leader Matteo Salvini told reporters on Monday after meeting Mattarella. Salvini has vowed to deport thousands of failed asylum-seekers from Italy where over 600,000 migrants have arrived from Africa since 2014, severely straining the country's reception facilities.
Five-Star leader Luigi Di Maio told reporters on Monday that he had asked Italy's president Sergio Mattarella for "a few more days" of talks to deal with unresolved issues between the two sides - which include their pick of premier.
Italy has been in political limbo since the inconclusive 4 March national election in which populist parties made strong gains and in a bid to avoid appointing a caretaker government Mattarella last week granted Five-Star and the League four days of last-ditch talks through Sunday.
Five-Star is the biggest political party and the centre-right is the largest bloc in the hung parliament, and Di Maio and Salvini both covet the role of prime minister.
If the Five-Star-League tie-up falls through, Mattarella will appoint a 'neutral' government to oversee a re-vote, probably in the next few months.
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