The leaders of East Riding and Hull councils issued a joint statement saying they had been told by Minister Luke Hall "that the Government will shortly be ready to move forward to the negotiation stage of our proposed Hull and East Yorkshire devolution deal".
Talks will begin with the Ministry of Housing, Communities and Local Government after May's local elections over the proposal for a host of new powers and up to £1.6bn in extra funding to be given to a new mayoral combined authority.
Stephen Brady, Labour leader of Hull City Council, and Conservative Richard Burton, leader of East Riding of Yorkshire Council, who submitted their proposal several months ago, said the news was very welcome.
And they added: "We should be in a position to begin local consultation before the end of the year, when the detail will be much clearer on what the deal could offer to our residents and our region.”
It comes as local leaders in North Yorkshire and York start their own negotiations with government about their devolution proposal, which they hope would be worth up to £2.4bn and help make the county the first 'carbon-negative economy'.
Local leaders in the East Riding and Hull had originally hoped to join forces with councils in North Lincolnshire and North East Lincolnshire as part of a pan-Humber agreement. But the two south bank authorities decided to align with the rest of Lincolnshire instead.
The Hull and East Riding document says that social cohesion is "relatively strong" across the population of 600,000, which is evenly split between the city of Hull and the surrounding area and more than 300 market and coastal towns, villages and hamlets.
But the average annual salary is only 87 per cent of the national figure and the relative lack of higher paid jobs limits the area's ability to retain and attract high skilled workers.
It is hoped that with the help of the extra funding currently under the control of government new programmes can be set up which will improve access to jobs for young people and stop poverty from being passed down the generations.
Henri Murison, director of the Northern Powerhouse Partnership, which lobbies on behalf of business and civic leaders, said the Hull and East Riding proposal "has the full support of businesses on North Bank of Humber.
"Following the success of ABP securing a pan-Humber Freeport - judged the best bid in the country - there is a wealth of industrial potential in the wider region for local government, backed by Treasury, to unlock.
"In order to maximise these opportunities, we must direct further investment into sectors such as green energy, including Carbon Capture, Utilisation and Storage across the estuary and at Drax power station in Selby.
"We expect there will be further opportunities to make common cause with a North Yorkshire and York Mayoral Authority when that is agreed.
"These two authorities have our full backing in driving forward a devolution deal. Their shared interests in transforming the Hull economy - and that of its entire travel to work area - make this a coherent proposition and a key milestone in building the Northern Powerhouse."