Kanu is expected to sign a new Portsmouth contract within the next 24 hours and take his place among manager Harry Redknapp's new-look strikeforce.
The Nigeria international has returned to training with Pompey after an extended close-season break which followed the impasse over whether he would either sign a new one-year deal, hold out for two years, or move on.
But Portsmouth chief executive Peter Storrie and the player's representative finally reached an agreement over Kanu's future last night.
Now he is set to sign a one-year deal with a year's option - which will be activated provided he plays a required number of games.
A compromise appears to have been reached even though Kanu, who notched 12 goals last season and finished as the club's top marksman despite not scoring since February, originally insisted nothing but a straight two-year offer was acceptable.
The sticking point appears to have been the number of games Kanu must play next season to earn himself an extra year.
It seems Pompey have reduced the minimum number from 20 after Kanu, who turned 31 yesterday, insisted on possible injuries and his participation in the African Nations Cup - in January - being taken into account.
Portsmouth have not yet commented on the situation which has been one of the most protracted sagas of the summer but it now looks certain to have reached a conclusion.
Redknapp said last week in Hong Kong, where Pompey won the Barclays Asia Trophy with wins over Fulham and Liverpool without Kanu, that he was convinced the player would sign up again at Fratton Park.
Now the former Ajax, Inter Milan and Arsenal, star who joined Portsmouth on a free transfer from West Brom last summer, seems to have committed himself to a battle for places against new signings John Utaka, his £7million Nigerian team-mate, and £6million England newcomer David Nugent.
Nugent scored his first two goals for Pompey in a 7-0 friendly romp against Newport on the Isle of Wight last night - just 14 hours after another striker, Lomana LuaLua hit a hat-trick in a 4-1 win at Bournemouth.
Portsmouth are now undefeated in seven pre-season games.