The agreement, reached among EU envoys, must still win final approval from foreign ministers of the 27 EU states at a meeting in Brussels on Monday. It follows a string of European court decisions against the blacklisting of the group.
"The deal has been done. It (the PMOI) will be delisted," said one EU diplomat, although he stressed the decision would not become operative until ministers gave their approval.
The PMOI is the group which exposed Iran's covert nuclear programme in 2002. It began as a leftist-Islamist opposition to the late Shah of Iran and has bases in Iraq. Western analysts say its support in Iran is limited because of its collaboration with Iraq during the 1980-88 Iran-Iraq war.
PMOI allies have repeatedly accused the EU — which has led efforts to persuade Iran to curb its nuclear programme — of seeking to "appease" Tehran by keeping the group blacklisted.
Groups on the list — which also include Palestinian Hamas and Sri Lanka's Tamil Tigers — have their assets frozen.
In the latest legal setback to the inclusion of PMOI on the list, the European Court of First Instance in December annulled an EU attempt to keep the group's assets frozen after earlier rulings questioning the grounds for doing so. The EU merely said at the time that it would study the ruling.
In November 2007, a British appeals commission ruled there was no evidence that the PMOI, which is also banned in the United States, had any terrorist intent.
Envoys from the EU states decided on Thursday to put forward a new terror list — without the PMOI — for the approval of their ministers on Monday, a second diplomat said.
They marked the list an "A-point" for the agenda of the meeting, which in EU jargon means an agenda point due to be approved without discussion. In rare cases, countries can demand that a A-point can be reopened for discussion. (Reporting by Mark John and David Brunnstrom; editing by David Brunnstrom)
