The Victorian Liberals' administrative committee met on Thursday night and agreed to lend former leader John Pesutto $1.55 million to settle his debt to first-term MP Moira Deeming.
The party will pay the money directly to Mrs Deeming and Mr Pesutto will be required to repay the loan at market-rate interest.
In a letter to party members, Victorian Liberal president Philip Davis said the outcome would ensure there was no by-election in Mr Pesutto's marginal seat of Hawthorn.
"Settling this matter once and for all is in the interests of the party as it will see an end to the ongoing commentary that is letting Labor get away with their appalling performance," he wrote.
The Hawthorn MP was ordered to pay $2.3 million in legal costs to Mrs Deeming after the Federal Court found he defamed her by implying she was associated with neo-Nazis.
It left him facing bankruptcy, which would trigger his exit from parliament and a subsequent by-election, unless the debt was paid back in a matter of weeks.
Mr Pesutto, who has already coughed up $315,000 in damages, had raised only about $750,000 through wealthy backers and a GoFundMe campaign.
An offer to defer some of the legal bill in exchange for Mrs Deeming's guaranteed preselection and Mr Pesutto swearing off trying to return as leader for three years were rebuffed.
Entering parliament on Thursday morning, Mr Pesutto was upbeat about the committee agreeing to his loan request.
"I certainly hope it gets resolved," he said.
"Tonight's an opportunity to square (the issue) off and put it all behind us."
Mrs Deeming, who was expelled from the party room before being welcomed back in December, was sceptical it would end the infighting that has engulfed the party since March 2023.
"I assume that they will continue with their quest to try to annihilate me," the upper house MP said.
Mrs Deeming said the party can "do what they like" but she would take any support of Mr Pesutto as a "direct rebukement (sic)" of the court judgement.
She said her party room colleagues "don't speak to me" because she "had the audacity to defend myself against false claims".
"Some of them are very nice," Mrs Deeming said.
"But I really do get treated as though it is my fault and that I'm the aggressor, and that's ridiculous."
Opposition Leader Brad Battin has not escaped internal criticism of his handling of the saga despite inheriting it when he replaced Mr Pesutto as leader in December.
He attended the meeting but would not reveal how he intended to vote.
"I'll go through the process with the administrative committee and keep all my conversations with them confidential," Mr Battin said on Thursday afternoon.
Time is running out for Mr Battin to unite the party before the next state election in November 2026.
He had a message for Mr Pesutto or Mrs Deeming if the outcome of the meeting did not go their way.
"Should any person wake up unhappy tomorrow, I would say to them, 'Have a look around and smell the roses and let's see what Victoria really needs'," Mr Battin said.
"They need an opposition whose ready to govern and we'll ensure that is us."
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