The United Methodist Church has about 13 million members worldwide, with around half of those in America, making them the second largest Protestant denomination after the Southern Baptist Convention.
It has disagreed internally over whether to allow same-sex marriage and ordain clergy in gay relationships for many years.
A 16-member group of United Methodist bishops and other leaders has now offered a proposal they hope will preserve the Church by allowing more conservative congregations to form a new denomination.
The 'traditional Methodists' group would get $25 million in United Methodist funds over the next four years and would keep its local church properties.
Details are in a nine-page document called 'Protocol of Reconciliation & Grace Through Separation,' released on Friday.
The proposal requires approval by the 2020 General Conference.
New York Conference Bishop Thomas Bickerton, part of the group, said: "It became clear that the line in the sand had turned into a canyon,"
"The impasse is such that we have come to the realisation that we just can’t stay that way any longer.
"This protocol provides a pathway that acknowledges our differences, respects everyone in the process and graciously allows us to continue to live out the mission of making disciples of Jesus Christ for the transformation of the world, albeit in different expressions."
The plan restructures the United Methodist Church into regions, with flexibility to adapt church policies.
The traditionalist Wesleyan Covenant Association has already taken steps to form a new denomination by drafting a book of policies and doctrines.
Jan Lawrence, the executive director of Reconciling Ministries Network, a group which has tried to remove restrictions on LGBTQ participation, said: "As a United Methodist who is LGBTQ, my priority at the table was to make sure we addressed the full participation of LGBTQ people in the life of the church, making sure the answer was not `ask us again in 2024.' The language needs to be removed now. I am pleased that there is opportunity here for that to happen in 2020."
Representatives of traditionalist, centrist and progressive advocacy groups joined a handful of bishops from the U.S., Africa, Europe and the Philippines to reach the agreement. They promised to support it and no other.
The 2019 General Conference saw passage of the 'Traditional Plan', reinforcing restrictions on same-sex weddings and ordination of LGBTQ persons.
The enforcement provided of the Traditional Plan went into effect on 1st Jan but the new proposal calls for leaving any administrative or judicial processes related to same-sex weddings or ordination of gay clergy alone for the foreseeable future.