The governments of India and Pakistan said they have agreed to resume wide-ranging peace talks that were frozen after the 2008 Mumbai attacks.
The decision comes after a year of discussions by top officials from the nuclear-armed rivals about how to rebuild trust between the neighbouring countries.
The two governments announced they would restart the talks in a joint statement issued simultaneously in New Delhi and Islamabad.
The statement said the talks would focus on counter-terrorism, humanitarian issues, peace and security, the fate of Kashmir - a region claimed by both countries - and other border issues.
Pakistan prime minister Yousuf Raza Gilani welcomed the talks and praised his Indian counterpart, Manmohan Singh, for the "opening of a new chapter in the relations between the two countries, which Pakistan fully reciprocates".
The US has been pressing the nuclear-armed rivals to restart their peace efforts in the hope that reducing tensions along their border would free Pakistan to focus on its fight against Taliban militants - a key element of US strategy in Afghanistan.
The decision followed talks on Sunday between the foreign secretaries of the two countries in Bhutan, the latest in a year-long string of meetings of top officials intended to rebuild the shattered trust of the two nations.