Controversial plans to reform the system of control orders for suspected terrorists will be outlined by Home Secretary Theresa May this week.
The orders, which have been described as being akin to house arrest by critics, are likely to be replaced with "surveillance orders"
The system of curfews will be eased, along with restrictions on the use of mobile phones and computers, but some controls are likely to be kept for a small number of individuals.
The issue is particularly fraught for the Liberal Democrats and Deputy Prime Minister Nick Clegg, who campaigned at the general election on a pledge to abolish control orders completely.
It is understood the revised form of control orders could include concessions over pastoral care, education and work.
Lord Carlile, the independent reviewer of counter-terrorism powers, said everyone now understands that there is a small cohort of suspected terrorists who could not be prosecuted and "against whom some protection is required".
"If we do not have curfews, and if we do not have limitations on meetings and the use of the internet, then we might as well not have them at all," he told MPs last month.
"If we don't have them at all, then in my judgment there will be terrorists walking the streets who present a great danger to the public."
A total of eight terror suspects are currently subject to control orders, but putting them under surveillance instead would be difficult with limited resources.
Round-the-clock surveillance of just one suspect can involve up to 60 officers, it is understood.
Civil rights group Liberty has said the "confused and conflicting" briefings coming out of government made it impossible to assess what was being proposed.
Shami Chakrabarti, the charity's director, said: "The crucial question remains whether suspects are to be brought within the criminal justice system or branded criminals by executive order and left under permanent suspicion and restriction in the community."
On Wednesday, the Government announced controversial powers to detain terror suspects without charge for 28 days would not be renewed.
Mrs May will let the order allowing the detention period expire, meaning that from Tuesday next week the detention limit will revert to 14 days.
The Home Secretary will unveil the result of a sweeping review of counter-terrorism powers on Wednesday.
Shadow home secretary Yvette Cooper accused the Government of drawing up plans for "internal political reasons" rather than basing policy on "actual evidence".
"The Tory-led Government's counter terrorism review process is shambolic," she said.
"The review has been delayed so long that counter terrorism measures will lapse on Monday even before they have published the review evidence this week. At the same time there's clearly a political row going on with Liberal Democrats and Conservatives saying different things, yet none of the briefing is based on the actual evidence and conclusions of the review.
"National security is and must continue to be the foremost responsibility of the Government, and one that should draw cross-party support. I intend to press the Conservative-led Government every step of the way to do the right thing based on the evidence for our country's security, rather than for their own internal political reasons."
Daniel Hamilton, campaign director of Big Brother Watch, said: "Placing people under house arrest without charge is wrong, however the government try to dress it up.
"The coalition should adopt an approach to fighting terrorism which balances civil liberties and security rather than appealing to authoritarian populism in this way."