Talks in Brussels on Thursday focused on seeking to reassure Belgium - which holds most of these frozen assets - and several other concerned countries that Europe would share the legal and financial risks, in a bid to secure their backing for the plan.
"Now we have a simple choice - either money today or blood tomorrow," said Polish Prime Minister Donald Tusk, urging fellow EU leaders to agree to the proposal.
"All European leaders have to finally rise to this occasion."
The EU sees Russia's war as a threat to its own security and wants to keep Ukraine financed and fighting.
With public finances across the EU already strained by high debt levels, the European Commission has proposed using frozen Russian central bank assets that are mostly held in Belgian clearing house Euroclear to secure a huge loan to Kyiv.
But Belgium is deeply concerned about being left exposed to legal and financial risks, and other states including Italy have also expressed worries.
Several EU leaders arriving at the summit said it was imperative they find a solution. They were also keen to show European countries' strength and resolve after US President Donald Trump last week called them "weak".
"We just can't afford to fail," EU foreign policy chief Kaja Kallas said, adding that leaders would stay at the summit as long as needed to find a solution.
Tusk said leaders agreed that they should work on a loan rather than other options, but stressed that they had many hours of increasingly technical discussions ahead of them.
Ukrainian President Volodymyr Zelenskiy, who took part in the summit, urged the bloc to agree on a deal he said would allow Ukraine to keep fighting.
"The decision now on the table - the decision to fully use Russian assets to defend against Russian aggression - is one of the clearest and most morally justified decisions that could ever be made," he said.
"If this decision isn't made now, the Russians - and not only them - will feel that Europe can be defeated."
Belgian Prime Minister Bart De Wever told his country's parliament early on Thursday that he had not yet seen guarantees that answered his concerns on legal and liquidity risks and that financing plans were still changing "as we speak".
Russia's central bank has said the EU plans to use its assets are illegal. It filed a lawsuit in Moscow this week seeking $US230 billion ($A348 billion) in damages from clearing house Euroclear.
The stakes are high because without the EU's financial help Ukraine will run out of money in the second quarter of next year and most likely lose the war to Russia, which the EU fears would bring closer the threat of Russian aggression against the bloc.
Kallas put the chances of a deal on the assets at 50/50. German Chancellor Friedrich Merz said: "My impression is that we can come to an agreement."
The latest draft version of the summit conclusions, which is not yet agreed and could still change substantially, proposes that the leaders take the political decision of going ahead with the reparation loan, and task officials with "urgently" sorting out the details.
The draft text specifies the risk would be shared among EU states, among several conditions meant to reassure Belgium and others.
Another option could have been for the EU to borrow the needed amount against the security of the EU budget and then lend the money to Ukraine.
But such a move would require unanimity among the 27 EU countries and Moscow-friendly Hungary has already said it would veto it.
Diplomats said the use of the Russian assets was therefore in practice "the only game in town".
But to use it, EU leaders first need to convince Belgium, which holds 185 billion euros of the total 210 billion euros frozen in Europe, that they will not leave it alone with the bill if Russia successfully sues in international courts.
