After four days of talks in Oslo, representatives of the Sri Lankan government and the Liberation Tigers of Tamil Eelam on Thursday decided to develop a system that would give the rebels regional autonomy.

The LTTE had been fighting for independence since 1983, but gave up the demand ahead of the third round of talks in Oslo.

Vidar Helgesen, the Deputy Foreign Minister of Norway, the peace broker, said the talks were conducted in a "frank, open and constructive manner".

"The parties have decided to explore a political solution founded on internal self-determination based on a federal structure within a united Sri Lanka," a joint statement issued at the end of the talks said.

Political steps must be supported by measures to ensure continuation of an existing ceasefire, it said adding "concrete measures will be taken to facilitate further de-escalation".

The agreement was reached a week after LTTE chief V Prabhakaran said for the first time that his outfit was in favor of a solution that offered "substantial regional autonomy".