The Israeli cabinet has approved the withdrawal of its troops from the northern half of a village deemed by the United Nations to be inside Lebanon.
Ghajar is split in two by the UN, a de-facto border which separates the two countries.
Details of the plan will be worked out with UN peacekeepers in the next month.
Pulling out of the village will fulfil Israel's obligations to the UN, but will cut the village in two.
About 2000 people live in Ghajar, a hillside village which was once part of Syria. Families are on either side of the UN line.
Israel captured Ghajar, along with the Golan Heights, from Syria in the 1967 Six Day war.
The BBC reports most of the villagers still consider themselves Syrian.