Ukraine's President Volodymyr Zelensky plans to pull Ukrainian troops back all along the front line in the east, if Russian-backed rebels reciprocate.
The announcement came from his foreign minister, Vadym Prystaiko, on Ukrainian TV. Such a pull-back has already happened in one frontline village.
He also said he was hoping for another major prisoner swap with Russia, "literally next week".
Mr Zelensky came to power promising to end the five-year conflict in the east.
Large parts of the Donbas region were seized by the Russian-backed separatists in April 2014, after Russia captured and annexed Ukraine's Crimea region.
Sporadic exchanges of fire - mainly mortars and machine-gun bursts - continue along the 400km (249-mile) front line.
The separatist rebels remain defiant, warning Mr Zelensky that he cannot dictate terms for areas that they control.
Commenting on the prisoner swap proposal, Kremlin spokesman Dmitry Peskov said "Russia would be glad to fulfil an 'all for all' exchange".
A landmark prisoner exchange took place on 7 September, raising hopes for a lasting thaw.
Mr Zelensky announced earlier this week that Ukrainian troops would pull back from two more villages next week - Zolote and Petrivske.
"After that, he plans to disengage along the entire 400km, so that people stop dying along those 400km, and this will be phased," the foreign minister said.
France and Germany are the diplomatic guarantors working to restore peace. But no date has been set for a possible summit between Mr Zelensky and Russian President Vladimir Putin.
How could a peace deal take shape?
Negotiations are now focusing on a plan known as the "Steinmeier formula" to bring special status in the separatist-held east.
President Zelensky, elected in May, says he is prepared for fresh elections to be held in the rebel-held areas of Luhansk and Donetsk regions. But on Thursday night he set rigorous preconditions for them:
- A full ceasefire
- Withdrawal of all "foreign military units" from Donbas (the Donetsk-Luhansk conflict region)
- Ukrainian border guards to be deployed on the Russia-Ukraine border
- Russia and Ukraine to exchange all remaining prisoners
The rebels have Russian heavy weapons and, according to Western and Ukrainian intelligence, help from Russian regular forces. The Kremlin insists that only "Russian volunteers" are with the rebels.
Mr Zelensky says elections in Donbas, whenever they happen, must include candidates from Ukrainian political parties - not just pro-Russian ones; there must be international election monitors and Ukrainian election law must apply. They must not take place at gunpoint, he said.
On Wednesday the rebel leaders in Donetsk and Luhansk - Denis Pushilin and Leonid Pasechnik - said any Ukrainian law on special status for the regions under their control would have to be agreed with them. They reject any rule from Kiev, calling their territories "republics".
They were defiant about Mr Zelensky's conditions for elections, in a statement quoted by the rebel dnr-news website.
"When he [Zelensky] says that elections in Donbas will take place only once Ukraine has control over the border he fails to understand that it's not for him, but for us, to decide when we have elections. The Kiev authority won't get any control over the border," they said.
The conflict has left 13,000 people dead and displaced about 1.5 million.
A win for Russia?
The BBC's Jonah Fisher in Kiev says it is hard to see how the proposed elections would be fairly contested, even if held under Ukrainian law. Most people with strongly pro-Ukrainian views left the occupied areas long ago, he points out.
Mr Zelensky's critics in Ukraine warn that such a deal with the rebels and their Russian backers could amount to a capitulation.
Ukraine's Segodnya news website says a military disengagement on the front line was discussed at a meeting of the Minsk "contact group" on Tuesday.
A ceasefire deal was reached in Minsk, the Belarus capital, in 2015, but it has been violated many times since then.