The four government parties, the Moderates, Christian Democrats, Centre Party, and Liberal Party (Folkpartiet) have forged a comprehensive framework agreement with the Greens which Prime Minister Fredrik Reinfeldt called "historic".
"This lays the long-term groundwork for a humane, just, and orderly migration policy," he said during a Thursday morning press conference.
He added that the agreement means that Sweden has made a clear choice about where the country's migration policies are heading.
"We're going to continue on the road toward humanity and order, this is a choice which closes the door on xenophobic forces," said Reinfeldt.
Among other things, the agreement will give illegal immigrants the right to healthcare and education.
The parties agree that there is a problem with the identification demands placed on people looking to reunite with their relatives who have immigrated to Sweden, the Green Party's Mikaela Valtersson said.
Families from Somalia, for example, have a hard time reuniting due to the lack of official documentation about their identity.
The various options for confirming someone's identity will be improved, with one option being the use of DNA matching technologies.
The new agreement may cost up to 1.7 billion kronor ($267 million) and will have "significant effects on public finances", although it remains difficult to give an exact cost before knowing how many illegal immigrants that will be starting school and are in need medical care.
Some estimates put the number of school-age undocumented children with the right to attend school at 3,000-4,000.
“That number is uncertain and many of those children are already studying,” said education minister Jan Björklund, adding that the new rules will likely be in place by the autumn term of 2012.
Sweden also plans to launch an independent migration research institute.
Centre Party leaders Maud Olofsson pointed to the importance of combining migration and labour policies, citing an ongoing inquiry into circular migration which is led by Valtersson.
"Today it's getting a job that matters, but regardless of whether or not someone has a job or starts their own company, people should have the ability to come to Sweden and contribute," said Olofsson.
"See these people as help for building Sweden."
Reinfeldt explained that he used the expression "close the door" in explicit reference to Sweden Democrats, a far-right party which gained seats in the Riksdag for the first time in September campaigning on an openly anti-immigration platform.
"We who believe that people should be free to move across borders and seek a better life somewhere else have made this agreement," he said.
"We're closing the door on the only area they [the Sweden Democrats] care about and want to have influence on."
In a statement, Christian Democrat leader and social affairs minister Göran Hägglund said the agreement created a "stable majority in the Riksdag" and "ensured that the Sweden Democrats won't have any influence over immigration policy moving forward".
According to the Green Party's Maria Wetterstrand, the most important thing is that Sweden is no longer among countries that degrade their asylum and immigration policies following the entry of a xenophobic party into parliament.
"Because the government chose the Green Party, policies are moving away from the Sweden Democrats," she said.
But Sweden Democrat leader Jimmie Åkesson believes the new agreement will have the opposite effect, giving Sweden an even more extreme immigration policy, something which he expects will benefit his party.
"We are getting yet another debate which will benefit us in the long run. The question is whether there is a popular mandate for these policies. I don't think there is," he told TT.
Åkesson added that it's regrettable the government chose to work with the Greens, labeling the party one of the most extreme when it comes to immigration policies in that it wants unrestricted immigration.
“It will cost between one and two billion kronor, money that should be spent on other things,” said Åkesson.
An inquiry into healthcare for illegal immigrants is expected to be completed in May, at which time proposals will be presented about what rules will apply.
“People are however not supposed to come here for healthcare; this is for people who are already here”, said Hägglund.
Reinfeldt explained that the Social Democrats and the Left Party were not part of the agreement due to different views on the subject of labour migration.
“This agreement is very much in line with our pro-work policies and therefore it's not possible for the Social Democrats and the Left to cooperate. My impression is that the Social Democrats have been against people coming here to find work. Work is essential to me,” he said.