Egyptian and Qatari intelligence officials have met in Cairo to discuss reconciliation as part of Saudi-brokered efforts to end an 18-month standoff over Doha's support of the Muslim Brotherhood, security and diplomatic sources said.
The sources said Qatar's intelligence chief - Ahmed Nasser Bin Jassim al-Thani - was present at the talks where a possible meeting between the Egyptian and Qatari heads of state early next year in Riyadh or Cairo was discussed.
Gulf states agreed in November to end a dispute with Qatar over its promotion of "Arab Spring" revolts.
Saudi Arabia, which has showered Egypt with billions of dollars in aid, has pushed for a similar rapprochement between Qatar and Egypt.
Qatar was a backer of elected Egyptian President Mohamed Morsi of the Muslim Brotherhood. Ties between the two countries deteriorated after the ouster of president Morsi last year which was followed by a crack down on the Brotherhood that was designated as a terrorist organization by the government in the same year.
Egypt, Saudi Arabia and the United Arab Emirates consider the Brotherhood a threat to their ruling systems. To Egypt's irritation, Qatar has sheltered exiled Brotherhood leaders.
Like Saudi Arabia, the UAE and Bahrain, Egypt withdrew its ambassador to Qatar this year. While the others agreed to normalise ties under the November deal, Cairo has yet to follow.
Evidence has mounted in recent days that Saudi mediation could reach fruition. On Saturday, Sisi - now president - met a special envoy of Qatar's emir.
Then on Monday, Qatari-owned Al Jazeera television - which denies Egypt's charges of being a Brotherhood mouthpiece - suspended broadcast of its Egypt-focused channel.
The diplomatic flurry raised expectations that Egypt might free three Al Jazeera journalists in prison on charges related to supporting the Brotherhood.
It was unclear if the journalists' case was discussed in the intelligence officials' talks, which took place on Tuesday.
But the Australian foreign minister said on Wednesday the case of Australian Peter Greste was "under consideration" by high levels of the Egyptian government and she hoped for his release by the end of the year.
Sisi has been reluctant to interfere in judicial cases but suggested last month he might pardon Greste, Canadian-Egyptian Mohamed Fahmy, and Egyptian Baher Mohamed.
A diplomatic source in the Gulf told Reuters the talks also covered Qatari involvement in Libya, where two governments vie for legitimacy and threaten to destabilise neighbours.
The source said Egyptian intelligence was checking Qatar had ceased alleged funding of Islamist groups in Egypt before any reconciliation.
"Egyptian authorities understand that not all their demands will be met right away ... but they have to make sure Qatar is serious and not just making a few cosmetic changes," he said.
Edited by Ahram Online