Turkey had helped to implement a naval blockade of Libya, but had earlier expressed concern about the alliance taking over operational command of the UN-backed no-fly zone from the US.
Speaking to journalists on Thursday, Davutoglu said: "Compromise has been reached in principle in a very short time. "The operation will be handed over to NATO completely."
Davutoglu said this would happen as soon as possible, within one or two days.
He said agreement had been reached in a teleconference with his counterparts from the US, France and Britain.
NATO will take command of the international coalition's military operations in Libya on Monday or Tuesday, a
diplomat told the AFP news agency on Thursday.
"NATO countries are in agreement to launch final planning enabling it to take over the command from the coalition Monday or Tuesday," said the diplomat, who asked not to be named.
The US had been keen to hand over operational control to the military alliance as soon as possible.
Davutoglu's announcement followed a fouth days of talks over the issue at a NATO summit in Brussels.
All 28 members of NATO needed to back any agreement and Turkey had previously rejected backing any plan unless it was given assurances that the operation would be limited to protecting civilians, enforcing an arms embargo and a no-fly zone, and providing humanitarian aid.
US admiral James Stavridis, NATO's overall commander, was in Turkey on Thursday to convince leaders there to back the agreement on the alliance's role.
Critical voices
The need to forge a consensus on Libya that involved Turkey and retained Arab support had becomes more critical each day, after NATO talks began on Monday.
Along with Turkey, Germany had also proved to be an obstacle to any agreement, abstaining from the UN Security Council vote that initially approved the no-fly zone, and reportedly refusing to help enforce the international arms embargo on Libya on Wednesday.
China, India and Russia, which all abstained from the Security Council vote, have repeatedly criticised the military action, and remaining in the lead role had exposed the US to their disapproval.
China's foreign ministry reiterated its call for a ceasefire on Thursday, warning that the conflict could escalate and "worsen the situation region-wide".
"We believe that the objective of enforcing the UN Security Council resolution is to protect humanitarian [objectives] and not to create an even bigger humanitarian disaster," spokesman Jiang Yu said.
The three nations, as well as South Africa and Brazil, are expected to raise their concerns at a Security Council meeting on Thursday, where Ban will deliver a briefing on the operation.
Jacob Zuma, the South African president, said his country "rejected any foreign intervention, whatever its form".
Thought some observers thought South Africa would abstain at the Security Council last week, it voted in favour of resolution 1973.
In an interview on Thursday, Ban rejected concerns that the operation would stall or reach a quagmire.
"I think this is different than other situations," he said. "I believe that the international coalition will have a successful operation."
Source:Al Jazeera and agencies
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