The announcement came hours after Israeli Prime Minister Benjamin Netanyahu's office said a "professional team" would be appointed to resolve the financial dispute.
The closure - which seemed to be the longest since at least 1990 - has left thousands of pilgrims and tourists seeking to visit the site locked outside.
Some have kneeled in front of its massive wooden doors to pray on the cobblestones of Jerusalem's Old City.
"We hereby announce that the Church of the Holy Sepulchre... will be reopened to the pilgrims tomorrow, February 28th, 2018 at 4:00 AM (0200 GMT)," said a joint statement by church leaders issued on Tuesday night.
The church is built where Christians believe Jesus was crucified, buried and resurrected.
Custody of it is shared by the Greek Orthodox, Armenian and Roman Catholic denominations.
Tuesday's statement was signed by senior clerics of the three faiths in the Holy Land.
"We... give thanks to God for the statement released earlier today by Prime Minister Netanyahu and offer our gratitude to all those who have worked tirelessly to uphold the Christian presence in Jerusalem," it said.
Christian leaders are in part angry over attempts by Israeli authorities in Jerusalem to enforce tax collection on church-owned property they consider commercial, saying exemptions only apply to places of worship or religious teaching.
Netanyahu's office said the measures would be suspended pending discussions.
Israeli Regional Cooperation Minister Tzachi Hanegbi will also look into the issue of land sales in Jerusalem by Christian bodies.
During that time, a proposed law that Christian leaders say would allow Israel to expropriate church land is to be shelved, the statement said.
An official of the Roman Catholic Custody of the Holy Land welcomed the prospect of talks with the Israeli authorities.
"From the beginning we said that we have duties to have a dialogue, and not let ourselves be forced to make drastic decisions," he told AFP.
'Dark period'
Jerusalem Mayor Nir Barkat says the city is due 650 million shekels ($186 million/152 million euros) in uncollected taxes on church properties.
He stresses the Church of the Holy Sepulchre and all other churches are exempt, with the changes only affecting establishments like "hotels, halls and businesses" owned by churches.
Christian leaders say the measure jeopardises their ability to conduct their work, which also includes social services to those in need.
A separate controversial bill seeks to allay the fears of Israelis who live in homes on lands previously held by the Greek Orthodox Church and which were sold to private developers, according to the lawmaker proposing the legislation.
The bill would allow certain lands sold by the Greek Orthodox Church to be handed over to the state, which would then compensate those who bought it from the church.
"This reminds us all of laws of a similar nature which were enacted against the Jews during a dark period in Europe," Christian leaders said in a statement on Sunday.
Recent land sales by the Greek Orthodox Church - a major landowner in Jerusalem - to unknown buyers have drawn fire from both Israelis and Palestinians.
Palestinians fear the sales will favour Israeli settlement construction in east Jerusalem, while Israelis are concerned over private developers' intentions for the land.
The dispute over the taxes and proposed law is also linked to the Israeli-Palestinian conflict.
The church is located in Israeli-annexed east Jerusalem, which the Palestinians see as the capital of their future state. Israel sees the whole city as its undivided capital.
Christians in Jerusalem are mainly Palestinians and Arab Israelis.
After Tuesday's suspension, Dimitri Diliani, head of the Palestinian National Christian Coalition, said the "churches were victorious over the occupation".
Bishara Sahwani, a 48-year-old Palestinian Christian from Jerusalem wearing a large cross and who was among the protesters, said "we're here to support our church".
"This is a political play by (mayor) Nir Barkat, who wants to become prime minister and win voters when he decides to run."
The decision to close the church was extremely rare.
In 1990, Christian sites including the Holy Sepulchre were closed for a day to protest the installation of Jewish settlers near the church.
Christian sites were shut for two days in 1999 to protest the planned construction of a mosque near Nazareth's Church of the Annunciation, where tradition holds the Angel Gabriel announced to Mary she was to become the mother of Jesus.
Yola, a Syrian-born woman living in the Netherlands for 27 years, said her and her children "arrived on Sunday and we haven't been in as it has been closed".
"It was frustrating," she said, adding she had visited the church more than 50 years ago with her family at the age of two.
