Argentina has agreed for the first time to pay investors who have been holding out for full repayment of bonds which were defaulted on in 2002.
If the deal is approved by the Argentine Congress, the 50,000 Italian investors will receive 150% of the face value of the debt of $900m (£625m).
The deal comes as negotiations restart with hedge funds in a US court.
Argentina is trying to settle with all its creditors in order to be able to borrow again on international markets.
Finance Minister Alfonso Prat-Gay said the Italian investors’ holdings accounted for around 15% of the country’s defaulted debt that had not been restructured in 2005 and 2010.
The Italians were paid $1.35bn but had been asking for $2.5bn.
According to attorneys representing the Italian bondholders quoted by Bloomberg, of the 180,000 Italians who bought Argentine debt about 70% had entered into exchange agreements or had died.
Most of the survivors are between 60 and 80 years old and invested between $25,000 and $50,000 in Argentine debt.
President Mauricio Macri, who took office in December, has promised to resolve the litigation with bondholders and help the country return to the international capital markets.
Former president Christina Fernandez de Kirchner had refused the demands of investors who had held out for better terms than those offered in two debt restructurings in 2005 and 2010.