The compromise came after lawmakers from both conservative parties in the German coalition urged the Chancellor and her interior minister on Monday to resolve the dispute over migrant policy that has thrown her three-month-old government into disarray.
The Austrian Chancellor, Sebastian Kurz, has said that Germany's new migration agreement, which ended a political crisis in Angela Merkel's government, could force Austria to introduce tougher border checks on Italy and Slovenia.
The transit centre scheme was proposed in 2015 by a CSU politician, Stephan Mayer, but was rejected in the strongest terms by the Social Democratic party (SPD), then and now a junior partner in Merkel's grand coalition government.
Germany's constitution prevents federal ministers from outright quitting their positions, and must request to be dismissed by the German President.
He also believes that these elections "would revolve on the immigration issue" with no chance of victory for the Christian Democratic Union.
But Kurz warned "other countries, like Austria, will react by national measures" if Berlin confirms it will turn away asylum seekers arriving at the German border if they were registered elsewhere.
Applicants in these centers-which would be built on the border with Austria-could then be turned away and sent back to whatever European Union country they came from.
Merkel rejected that proposal as a unilateral move that violated European asylum law and risked causing havoc with other EU governments.
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Merkel, however, rejected a key provision: turning back at the border all migrants previously registered in another European Union country as a unilateral act that would come at the expense of other member states.
The leadership of Merkel's party approved a resolution Sunday stating that "turning people back unilaterally would be the wrong signal to our European partners".
He could defy her orders by ordering border police to carry out his plan, which would force her to fire him and nearly certainly break up the CDU-CSU alliance, or he could accept a humiliating climbdown or resign. But a Forsa poll on Tuesday showed a majority of Germans to be unhappy about the agreement.
Long angered by the influx of mostly Muslim refugees crossing via Austria into his Alpine homeland, Merkel's hard-line interior minister has threatened to openly defy her in what could end as a spectacular political suicide attack.
They argued such zones would not limit the number of migrants given that most were fleeing wars in the Middle East and Afghanistan and therefore entitled to asylum in Germany.
"It's not about who comes out on top, but about what's right", Bavarian state premier Markus Soeder told the CSU gathering, according to news agency DPA.
Seehofer will attempt last-ditch talks with Merkel on Monday, but the discussions will be taking place in an increasingly antagonistic atmosphere. To save her coalition, Merkel agreed to build transit camps for refugees trying to cross into Germany from Austria.