Arab foreign ministers said Damascus had until Sunday to agree to the league's plan. Further sanctions have been threatened.
A government spokesman in Damascus told reporters Syria was negotiating with the Arab League over the observers.
The league also confirmed sanctions already approved after Syria ignored a previous deadline last weekend.
Unrest in the country has continued, with 23 reported killed on Saturday.
After a meeting of the Arab League ministerial committee on Saturday, Qatari PM Sheikh Hamad bin Jassim Jabr al-Thani said: "We asked the Syrian minister of foreign affairs if the Syrian government will agree to sign tomorrow [Sunday] and we are still waiting for a reply.
"Aside from the deadline, we are willing to convince them that this is the right way - to sign the protocol and agree on the Arab initiative as it is."
At their Cairo meeting, Arab ministers also confirmed economic sanctions against Damascus approved in the past week.
These include cutting off transactions with Syria's central bank, freezing assets for 19 officials and aides of President Bashar al-Assad, and banning them from travelling to other Arab countries.
Mr Thani added: "The committee might add more measures in the future depending on the situation in Syria."
Former Iraqi national security adviser Mowaffaq al-Rubaie told the BBC that economic sanctions would hurt the Syrian people, not the government.
"We in Iraq were the victims of economic sanctions during Saddam (Hussein's) time, between 1990 and 2003," Mr Rubaie said. Iraq did not vote in favour of the Arab League sanctions.
Syrian Foreign Ministry spokesman Jihad Makdissi told reporters in Damascus on Sunday that messages were being exchanged with the Arab League to "facilitate the mission of observers in Syria, while preserving Syrian interests", AP news agency reported.
The Damascus government has said the league's proposal places gives monitors too much authority, infringing Syria's sovereignty.
On Saturday, activists said 23 people had been killed as violence continued.
Until recently, most of the bloodshed was caused by security forces firing on mainly peaceful protesters - but there have been growing reports of army defectors and armed civilians fighting government forces.
In one of the bloodiest incidents on Saturday, seven members of the security forces, five army rebels and three civilians were killed in a battle in Idlib, near the Turkish border, according to the UK-based Syrian Observatory for Human Rights.
It is impossible to verify reports of deaths as the Syrian government has severely restricted access for foreign journalists.
The UN estimates 4,000 people have been killed during a crackdown on anti-government protests.
Earlier this week, UN Human Rights Council strongly condemned the "gross and systematic" violations by Syrian forces.
The resolution demands the suspension of security forces suspected of violations and the release of prisoners of conscience.
The council also said it was appointing a special investigator to report to the UN secretary general on the crackdown.
November has been the deadliest month for the uprising which began in March, with at least 950 people killed in gun battles, raids and other violence, according to activist groups.
Syria is facing a new Arab League deadline to accept proposals to allow observers into the strife-torn country.