The revised bill incorporates a number of changes recommended by the Rajya Sabha Select Committee, including appointment of the Director of Prosecution by the Central Vigilance Commission or CVC.
The government, however, has not accepted a key recommendation of the panel that an official facing an inquiry by the Lokpal should not be given an opportunity to be heard at the stage of the preliminary inquiry.
The Select Committee, to which the controversial bill was referred in view of sharp differences between political parties, has recommended delinking of the creation of Lokayuktas from the Lokpal Bill.
This was one of the most controversial provisions with several parties contending that it amounts to the central government encroaching upon the rights of the states.
The bill had said state governments will have to set up Lokayuktas within one year of enactment of Lokpal.
On the issue of giving opportunity to an official to present his or her view, the government feels that such a protection is required and depriving the officials facing allegations the opportunity to present their views was against the "principle of protection".
Another recommendation made by Rajya Sabha Select Committee was that when a CBI officer investigating a case is sought to be transferred for any reason, prior approval of the Lokpal should be required.
The Cabinet has not favoured the proposal and has suggested an amendment saying transferring any official would remain the exclusive right of the government and the CBI chief as it was an administrative matter, sources said.
Another amendment to the Select Committee report approved by the Cabinet is that societies and trusts which receive government aid and not funds have been kept out of the ambit of the Lokpal.
But organisations which receive major funding from the government have been kept under the ambit of the proposed ombudsman.
The amendments will now be be put to vote in the Rajya Sabha where the measure is stuck since last year. After getting cleared from the Upper House, the legislation will travel back to Lok Sabha for fresh approval of the amendments.
The bill has already been passed by the Lok Sabha but government's efforts to provide Lokpal with Constitutional status did not succeed in the Lower House.