David Cameron and Nick Clegg will hold talks over the weekend to try to reach agreement on new measures to tackle the threat posed by Islamist extremists.
The negotiations come after the UK's terror threat level was raised from "substantial" to "severe" in response to mounting conflict in Iraq and Syria.
The PM will make a Commons statement on Monday to propose new powers to stop would-be terrorists travelling abroad.
It comes as Labour wants more action to stop Britons being drawn to extremism.
The party's leader Ed Miliband suggested the introduction of a "mandatory programme" of deradicalisation for people "drawn into the fringes of extremism".
Writing in the Independent, he also urged the government to revisit the decision to scrap the control orders regime for terror suspects.
His calls come after warnings from the prime minister that the group calling itself Islamic State (IS), fighting in Syria and Iraq, posed an unprecedented risk to the UK.
Mr Cameron is due to meet European leaders in Brussels, where he is expected to push for co-ordinated EU action to track jihadists.
Speaking on Friday, he said the "threat is growing" from Britons travelling to fight with IS, adding that there were "gaps in our armoury" that needed to be strengthened.
His comments came on the same day the new alert level rated the risk of an attack on the UK as "highly likely", although Downing Street said there was no evidence to suggest one is "imminent".
The rating is the second highest of five possible UK threat levels and is the highest since 2011.
Talks between Mr Cameron and Mr Clegg come after the Conservatives have said they wanted to make it easier to seize the passports of would-be terrorists travelling abroad.
The home secretary already has the power - under the Royal Prerogative - to withhold a passport if it is in the public interest to stop somebody travelling.
Mr Cameron is also likely to consider strengthening terrorism prevention and investigation measures - or Tpims - which were the coalition's replacement for control orders.
However, the Liberal Democrats have said they would only agree to policies that were made calmly, on the basis of evidence and that maintained the liberty of British citizens.
A Lib Dem source said Mr Clegg and the prime minister were in "constant communication" on the issue, adding that the party "will consider very carefully any new proposals that are put to us".
'Bombs and rockets'BBC political correspondent Louise Stewart said powers to withhold passports had been used 23 times since April 2013, but she said the PM could seek to strengthen those powers.
She said the government could not - following a ruling by the European Court of Human Rights - make somebody "stateless" by refusing them re-entry to Britain, if they had no other passport.
"The sticking point with the Liberal Democrats is they have been against introducing more surveillance measures but say that any new measures would have to be brought in on an evidence basis and it would have to be purely for the safety and security of the British public," our correspondent said.
Former Conservative defence secretary Liam Fox said he believed there should be intervention to deal with IS - including military action if necessary.
"We have to stop where we can the sale of oil on the black market from which it derives all its money. We've got to stop the flow of money from sympathetic groups within the region," Mr Fox told the BBC's Newsnight.
"I think we need to disrupt the command and control and supply lines of ISIS, and that will require air strikes along with the United States if we're asked to do so.
"I think it's also important that the West provides air cover, close air cover for any ground offensive counter attack by the Iraqis or the Kurds."
He added that any strategy had to be proportionate, limited, diplomatic, financial and political.
"But if you do require a military element to complete that strategy, you should be willing to do it," he said.
However, former Liberal Democrat leader Lord Ashdown argued that diplomacy was vital to limit the risk from jihadists.
"I think we have got to get away from this idea which says that in response to everything in the Middle East our answer is bombs and rockets," he said.
Lord Ashdown added that the government was unwise to concentrate on the "threat of jihadis coming home".
He warned that the bigger threat was a potential "regional war" in the Middle East, which would be religious and result in the changing of borders.
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