The former enemies say they will now work together
The Sudan government and rebels from the south have signed the accords making up a peace deal to end 21 years of fighting.
The agreement includes a permanent ceasefire, and protocols on sharing power and wealth.
The conflict - Africa's longest-running civil war - has pitted the Muslim north against Christians and animists in the south, leaving some 1.5m people dead.
UN Secretary General Kofi Annan says peace in the south may pave the way for an end to the conflict in the western region of Darfur.
Are the two conflicts linked?
Not directly, although rebels groups in both areas accuse the government of favouring the ruling Arab elite.
They are all demanding a greater share of Sudan's power and wealth.
But the south is inhabited by African Christian and animist groups who oppose moves to introduce Islamic law.
Rebels in Darfur are Muslim but say that as non-Arabs, they too suffer discrimination.
So can peace in the south help end the fighting in Darfur?
This is what optimists, such as Mr Annan, believe.
They argue that a framework for sharing power and wealth with the southern rebels can serve as a model for Darfur.
But pessimists say that the prospect of the southern rebels getting a share of power - their leader is supposed to become national vice-president - encouraged the Darfur rebels to take up arms.
They also say that peace in the south has enabled Sudan to switch its military resources to Darfur.
What was the war in the south about?
Apart from an 11-year period from 1972-1983, Sudan has been at war continuously since independence in 1956.
In 1983, the government dominated by northern Arabs tried to impose Islamic Sharia law across Sudan, even in areas where the majority is not Muslim.
This exacerbated a rebellion that had begun in the south, which is inhabited by black African Christians and those who practise traditional religions.
The rebel Sudan People's Liberation Army (SPLA) has never clearly stated whether it is fighting for autonomy for the south within Sudan, or outright independence.
What are the terms of the peace deal?
Both sides began formal talks in 2002.
When an agreement was reached in May 2004, negotiators hoped everything would be finalised within weeks.
But disagreements prolonged the talks, until in November both sides promised to reach a final deal by the end of the year.
On 31 December 2004 the final issues - a permanent cease-fire, and how to implement the peace deal - were settled.
The government and the southern rebels have agreed to set up a 39,000-strong army comprising fighters from both sides.
They agreed that the south should be autonomous for six years, culminating in a referendum on the key issue of independence.
The SPLA accepted that Sharia could remain in the north.
Sudan has recently become an oil exporter and both sides have agreed on the key issue of how to share out the revenue, which mostly comes from the south.
The SPLA has secured a large share of Sudan's oil money and lots of jobs - which may give a new incentive to rebellion in disgruntled regions elsewhere in Sudan.
It is unclear if other Sudanese will accept this arrangement, or if there may be a backlash against southerners in Khartoum and elsewhere in the north.
And the three border areas with special status in the agreement, where power is still shared, could cause problems later on - if the south votes to secede from Sudan and to claim full independence.
What were the final sticking points?
The signing of the framework deal went ahead after months of delay over a number of issues.
Much of the wrangling was over the distribution of government and civil service jobs between the two sides.
In the end, they agreed on a 70:30 split of all jobs in the central administration in favour of the government.
The SPLA insisted that the national capital, Khartoum, should not be subject to Islamic law, even though it is in the north.
They also wanted three central areas - oil-rich Abyei, Blue Nile State and the Nuba mountains - to be counted as part of the south, while the government said they were in the north.
In these regions, jobs will be shared 55:45 - again most go to the government.
On Khartoum, a rebel spokesman said that this would be decided by an assembly, to be elected.
Why has the United States been so involved?
The US has certainly put pressure on both sides to reach peace and the diplomatic muscle of the only superpower could prove decisive.
President George W Bush has been under pressure to help bring peace to Sudan.
Human rights campaigners are worried about continued reports of slavery, while right-wing Christians, who have considerable influence in his Republican Party, want him to end what they see as the persecution of Christians by Muslims.
There are also concerns about the continuing cost of providing a massive humanitarian relief effort through the United Nations to help millions of people left desperately poor by the fighting.
The US held out the carrot that the US would lift sanctions on Sudan if the war ends.
The US is also keeping a close eye on Sudan because of fears that terror groups may operate there.
Osama Bin Laden lived in Khartoum in the early 1990s and helped finance several major public works.