Philippine security forces and Muslim rebels have said they will join forces to root out foreign militants based on the country's southern islands.
Government troops will work with rebels to find foreign militants
The largest Muslim rebel group, the Moro Islamic Liberation Front or Milf, has said it will work with the army.
The joint action will target kidnapping syndicates and Jemaah Islamiah militants hiding in the south.
The agreement is due to be approved during peace talks in Malaysia later this month.
Some 30 to 40 Jemaah Islamiah militants are believed to be hiding on the southern island of Mindanao.
The Southeast Asian militant group is allegedly linked to al-Qaeda and blamed for the October 2002 Bali bombings.
The island of Mindanao is also home to the country's largest Muslim rebel group, the Milf.
According to BBC correspondent Sarah Toms the agreement between the government and the Milf marks a small but important step towards peace.
The rebels have been fighting for an independent Islamic state in the south for over 30 years.
The peace process has stalled and resumed many times but it is expected to gather steam with the recent re-election of President Gloria Arroyo.