The Islamic courts control much of southern Somalia
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Somalia's government and the Islamic group that controls the capital have agreed to end military campaigns at peace talks in Sudan.
The talks come two weeks after the Union of Islamic Courts took control of Mogadishu from an alliance of warlords.
The Islamists also agreed to recognise the legality of the interim government - a key demand - and to further talks.
Sudan's President Omar al-Beshir described the accord as "the beginning of the end of conflicts in Somalia."
BBC East Africa correspondent Karen Allen says that earlier this week, the two sides refused to sit in the same room.
Conflict fears
Somalia's President Abdullahi Yusuf was in the Sudanese capital, Khartoum, for the talks but the agreement was signed by Foreign Minister Abdullahi Sheekh Ismail.
Afterwards, he embraced Islamic scholar Mohamed Ali Ibrahim, who led the Union of Islamic Courts team, along with deputy chairman Sheikh Husein Mohamud Jumaale.
The talks were sponsored by the Arab League, currently chaired by Sudan.
They also agreed to stop "media campaigns" against each other and to meet again on 15 July.
There are fears of conflict between the Islamic courts, which controls much of southern Somalia, and the interim government, based in Baidoa, 200km north of the capital, Mogadishu.
These fears increased last weekend after the Islamists said Ethiopian troops had crossed the border, apparently in support of Mr Yusuf's government.
International pressure is mounting for both sides to negotiate a peaceful settlement and to establish Somalia's first effective national government for 15 years.
US U-turn
On Wednesday, the United States asked the Islamists to hand over three terror suspects, reportedly in Somalia.
The Islamist group has repeatedly denied accusations that it is harbouring foreign Islamic fighters.
Correspondents say the request to the Union of Islamic Courts is a U-turn for the US, which is widely believed to have backed the warlords defeated in Mogadishu.
Ms Frazer, Assistant Secretary of State for African Affairs, said there were many "foreign terrorists" in Somalia but the three most wanted by the US were:
- Comoran Fazul Abdullah Mohammed
- Kenyan Saleh Ali Saleh Nabhan
- Sudanese Abu Taha al-Sudani
She said they had been involved in the 1998 bombings of the US embassies in Kenya and Tanzania, which killed more than 200 people, and the 2002 attacks on Israeli targets in Kenya.
The US has offered a reward of $5m for information leading to the capture of Mr Mohammed.
"The best way to get America's support to the Somali people in a way that doesn't undermine our interests and their interests is for them to give up these foreign terrorists," Ms Frazer said, after meeting President Yusuf in Kenya.