The parliament in the Kurdish region of northern Iraq has approved a single administration, uniting two rival parties after more than a decade.
Iraqi President Jalal Talabani's PUK and the KDP joined forces
The parliament in the city of Irbil voted for the Kurdistan Democratic Party and the Patriotic Union of Kurdistan to run a unified government.
Kurds enjoyed self rule in three provinces in Iraq's north.
Analysts say Sunni Muslims fear the new move could herald a push for Kurdish independence in the oil-rich north.
But regional president Massoud Barzani said the unification would help the central Iraq government create stability.
Since fighting between the two main faction in the mid-1990s, the Kurdish region has been physically divided.
There have been two separate rival administrations duplicating everything.
Until now, Iraqi President Jalal Talabani's PUK had run Sulaimaniya province, while the KDP, under Massoud Barzani, had run Irbil and Dohuk.
Unification plans have been under discussion for years with agreements reached in principle often falling by the wayside.
The first concrete step came in 2002 with the reunification of the Kurdish regional parliament. Now, finally, the two governments have been merged.
The KDP and the PUK have divided up most of the cabinet posts between them, with five of the 32 going to other parties.
Mr Barzani said: "The new government of Kurdistan is not only for the Kurds, but for the other sects and ethnic groups such as the Christians and Turkomen."
The unification move was prompted by both outside and internal pressures, reports the BBC's Jim Muir.
Kurdish leaders want the oil-rich province of Kirkuk to be added to their region but their historic claim could not be pursued by a divided administration.
Kirkuk lies just south of the autonomous region.
Ousted Iraqi President Saddam Hussein moved thousands of Arabs to the predominantly Turkoman and Kurdish city and Sunni Arabs are now a majority.
Sunnis fear they will be left with an economic rump if the Kurds and the oil-rich Shia Muslim-dominated south break away.