The decision by Sinn Fein to hold a conference to decide whether to support policing has been welcomed by Tony Blair and Bertie Ahern.
Policing has been a dividing issue between the DUP and Sinn Fein
Around 2,000 party members will attend the event in Dublin on 28 January.
Sinn Fein president Gerry Adams recommended the date at a meeting of senior members in Dublin on Saturday.
The DUP's Jeffrey Donaldson also welcomed the move but said his party would need to see support by Sinn Fein translated into action on the ground.
Mr Blair and Mr Ahern have identified Sinn Fein support for the Police Service of Northern Ireland as being crucial to persuading the DUP to share power in a devolved government with Sinn Fein by 26 March.
Mr Adams told party colleagues they had taken "the historic and courageous decision to proceed to an ard fheis on policing despite the failure of the DUP to respond positively".
"I believe that the new beginning to policing promised in the Good Friday Agreement is now within our grasp," he added.
Welcoming the decision, PSNI Chief Constable Sir Hugh Orde said it was time to look ahead rather than concentrating on the past.
"What's interesting for me is that there was a substantial groundswell of opinion in the republican ranks that voted through the ard comhairle for this step, and hopefully now we'll get the right result," he told the BBC's Politics Show.
"My officers are interested in policing the present and the future. The past needs dealing with, but continual references to historic events does not help this debate.
"What we need to do now is move on and give my officers the ability to protect communities, now."
Secretary of State Peter Hain said Sinn Fein had "played its part in breaking the deadlock that has paralysed political progress in Northern Ireland".
"The St Andrews Agreement made it clear that a lasting settlement must be based on the twin pillars of support for police and justice by everyone and power-sharing on a fair and equitable basis by everyone.
"Of course there must be delivery on both of these commitments and there is absolutely no reason why we should not be on course for the restoration of the assembly and executive on 26 March and the devolution of policing and justice by May 2008."
Jeffrey Donaldson said the DUP "would not be found wanting in its response" if Sinn Fein delivered on "supporting the police and the rule of law, and an end to criminality and terrorism".
"It is essential that if we are to make progress and move towards the restoration of the institutions at Stormont that Sinn Fein make these moves and continue and build on what has happened today," he said.
Mark Durkan, leader of the nationalist SDLP, said Sinn Fein's ard fheis must agree to "accept policing, with no ifs or buts".
Peter Hain said Sinn Fein had played its part in breaking deadlock
"If they don't they will only be making it easy for the DUP to walk away, and in reality they will be letting Ian Paisley decide on policing in nationalist areas," he said.
Ulster Unionist Party leader Sir Reg Empey said he was hopeful that devolution could be restored to Northern Ireland if Sinn Fein delegates voted to sign up to policing.
He added: "Surely the best way forward is for the leadership of the DUP to meet the leadership of Sinn Fein, openly and with the public's knowledge, rather than more of these discussions going on behind people's backs.
"This step could avoid further misunderstandings and more damage to the already battered public view of politics."
'A step too far'
Meanwhile, potential difficulties facing Sinn Fein in persuading grass roots republicans to support policing have been highlighted by one of its former election agents, Paul McGlinchey.
The brother of murdered INLA leader, Dominic McGlinchey, says he will stand as an independent republican, if the assembly election goes ahead in March.
Paul McGlinchey said Sinn Fein's stance on policing was "a step too far" for him and he wants to give republicans an opportunity to have their say on the policing issue.
Mr McGlinchey, who left Sinn Fein last month, was released from the Maze prison in 1985 after serving almost ten years for arms offences.
Speaking on the BBC's Politics Show, Mr McGlinchey said republicans who opposed the Sinn Fein move hoped to stand candidates in at least 13 constituencies.