The Cabinet Committee on Security is meeting in New Delhi on Friday, two days after the return of an all-party delegation from Jammu and Kashmir.
Home Minister P Chidambaram had on Thursday held discussions with members of the delegation and sources said the opinion was in favour of taking 'structured, graduated step-by-step' confidence building measures for the state.
The CCS is expected to discuss the demands made by the J&K government for withdrawing the Armed Forces Special Powers Act from areas like Srinagar and Jammu cities.
Other demands that are likely to come up for discussion include release of youth arrested during protests.
A 36-member all-party delegation had visited Kashmir Valley on Monday during which a few leaders met separatists like Syed Ali Shah Geelani, Mirwaiz Umer Farooq and Yaseen Malik.