Barenboim, 72, who is general music director of the German capital's flagship opera house, the State Opera, "is in talks with Iran about a possible concert in Tehran by the Staatskapelle Berlin," the house said in an emailed statement.
German Foreign Minister Frank-Walter Steinmeier had agreed to take over the patronage of the concert as he "supports Daniel Barenboim's dedication to making music accessible to all people, irrespective of national, religious or ethnic boundaries," the statement said.
Further details of the concert would be announced "once the negotiations have been concluded," the opera house said.
Barenboim's plans have nevertheless angered Israel.
The Israeli culture minister Miri Regev had said Wednesday that she intended to send a letter of protest to German Chancellor Angela Merkel calling on her to block the concert.
"In my letter I shall stress that Daniel Barenboim's appearance in Iran harms Israel's efforts to prevent the nuclear agreement and gives encouragement to de-legitimisation of Israel," she wrote on her Hebrew Facebook page.
"Iran is a state which supports terror, is behind Hezbollah, Islamic Jihad and Hamas and its leaders have blood on their hands. I believe that Germany would be acting rightly if it were to cancel the appearance of the orchestra and its conductor," Regev continued.
She accused Barenboim - who founded a ground-breaking youth orchestra called the West-Eastern Divan Orchestra in 1999 that brings together Israeli, Egyptian, Iranian, Jordanian, Lebanese and Palestinian musicians - of "using culture as a platform for his anti-Israel political views."
Barenboim, who has also taken honorary Palestinian citizenship, conducted the Divan Orchestra in a concert in Ramallah in 2005.
He is also controversial in Israel for his efforts to have the music of Richard Wagner, the German composer adored by Adolf Hitler, performed in the Jewish state.
Iran reached a deal with world powers last month which will see Western-led sanctions against Iran lifted in exchange for a new inspections regime and curbs on Tehran's atomic programme.