The government is set to make a significant u-turn over planned relaxation of cross-media ownership rules, press reports suggest.

The Department of Culture, Media and Sport is reported to be ready to accept a compromise proposed by the Labour peer Lord Puttnam, which would force a large media corporation to submit to a public interest test if it wanted to buy Channel Five.

The concession, reported in the Guardian newspaper, would make it harder for conglomerates such as News International, Trinity Mirror or the Daily Mail group to gain a foothold in terrestrial television.

Ministers are said to have backed down after realising that Lord Puttnam could secure the support of over 50 Labour rebels. Both the Tories and the Liberal Democrats have already signalled that they would support his amendment.

Senior Labour peers, including former leader of the Lords Lady Jay and broadcaster Lord Bragg, are also backing the move.

The Puttnam amendment would give the culture secretary the power to refer a takeover to the media regulator Ofcom or the Office of Fair Trading.

The watchdogs would be instructed to conduct a public interest review and could block the takeover on these grounds.

But the Tories say the definition of public interest cannot be a "catch all" and must be clearly defined to prevent a takeover being blocked on political grounds.

A vote on the amendment, which may be redrafted to address ministers' concerns, could come as early as next week.