An agreement in principle that will see Ottawa pay billions in compensation to First Nations children harmed by an underfunded child welfare system is set to be announced in Ottawa today.

Sources have confirmed to The Canadian Press that negotiations reached final stages on New Year's Eve, resulting in an agreement that may finally bring an end to a human rights challenge launched 14 years ago.

The case has been a major sore point in reconciliation efforts with Indigenous Peoples in Canada, as both the former and current federal governments spent millions fighting it in court.

The battle began in 2007 when the First Nations Children and Family Caring Society and the Assembly of First Nations filed a human rights complaint arguing chronic underfunding of child welfare services on reserve was discriminatory when compared to services provided by provincial governments to kids off reserve.

Following multiple unsuccessful court challenges and appeals by the former Conservative government, the complaint was heard by the Canadian Human Rights Commission in 2013 and 2014.

In 2016, the tribunal ruled the federal government had discriminated against First Nations children.