Bhutan and Nepal say they have reached agreement over the fate of over 100,000 refugees who have been camped in eastern Nepal since the late 1980s.
About 100,000 refugees from Bhutan live in camps in Nepal
Roughly 9,000 refugees from one of seven UN camps will now be allowed to return to Bhutan.
Officials hope the landmark deal will allow for more refugees to be sent back to Bhutan or formally settled in Nepal.
Bhutan's government had earlier rejected the refugees' claim that they were legitimate Bhutanese citizens.
Nepalese diplomat Bhekh Bahadur Thapa said the repatriation of the first batch of refugees, from Khudunabari camp, would begin in four months' time.
"This is the beginning to the end of the refugee crisis," he said, the Associated Press news agency reports.
He was speaking after talks in the Bhutanese capital, Thimpu, which follow controversial efforts by the two countries to establish the refugees' ethnicity.
Bhutanese Foreign Minister Khandu Wangchuk told the BBC that roughly 70% of the refugees at one of the camps, which has a population of 12,000, will be allowed to return to Bhutan within the next four months.
Those refugees who wanted to stay in Nepal would be granted Nepalese citizenship, according to Mr Wangchuk.
The refugees claim they were forced out of Bhutan over a decade ago when the government, dominated by the majority Drukpa ethnic group, accused the Lothsampa minority of being illegal immigrants.