An announcement on the resolution of the issue is likely to be made during Chancellor Angela Merkel's visit to India in October.
The issue figured prominently during External Affairs Minister Sushma Swaraj's meeting here today with her German counterpart Frank-Walter Steinmeir and both sides discussed contours of a resolution.
As per the broad understanding between the two sides, India will continue to teach German as an additional language while Germany will promote Indian languages including Sanskrit in their educational institutions.
They said both sides were happy that the issue is being resolved.
More From This Section
"Basically what we have said all along is that we will continue to teach German as an additional language in keeping with our three language policy. So we will continue to do that. In Germany, they will promote Indian languages including Sanskrit," said the sources.
The Human Resource Development ministry had in November decided to discontinue teaching of German as an alternative to Sanskrit and cited "national interests" for its decision.
Sanskrit was introduced as a third language in Kendriya Vidyalaya Schools on the basis of a memorandum of understanding signed between the KVS and the Goethe Institute in 2011.
During Prime Minister Narendra Modi's visit here in April, both sides had agreed to encourage the teaching of each other's languages within the framework of their national policies.