Talks between the coalition partners -- the Protestant Democratic Unionist Party and Sinn Fein, the Catholic party associated with the Irish Republic Army -- ended Friday with an agreement to hand down police and justice powers to Northern Irish authorities this spring.
The conflict over the so-called devolution process had threatened to bring down the country's fragile power-sharing government. It was resolved Friday after two weeks of round-the-clock negotiations.
"This is the last chapter of a long and troubled story and the beginning of a new chapter after decades of violence, years of talks, weeks of stalemate," said British Prime Minister Gordon Brown, who along with his Irish counterpart Brian Cowen had mediated and pushed for a successful outcome of the talks.
A delighted U.S. Secretary of State Hillary Clinton called the agreement "another important step toward a full and lasting peace."
Washington, which had helped launch the power-sharing coalition, said the deal sends a positive signal to other conflict zones around the world.
"Northern Ireland gives us hope that, despite entrenched opposition and innumerable setbacks, diligent diplomacy and committed leadership can overcome generations of suspicion and hostility," Clinton said in a statement, adding Washington and herself would support the continuing peace process "in every way we can."
Clinton said she will host both DUP head Peter Robinson and Sinn Fein leader Martin McGuinness in Washington soon to "discuss further investment in Northern Ireland and ways to build on this agreement."
With the British general elections nearing, tensions had been running high during the negotiations between the DUP and Sinn Fein. Robinson and McGuiness exchanged attacks through the media and at the conference table, with Brown and Cowen trying to mediate.
The conflict circled around the London-backed plan to give away its powers over Northern Ireland's police and judicial system to local authorities.
Sinn Fein has accused the DUP of "delaying" this process to wait for a conservative government in London to take on a different position. Yet both parties also played hard to get to appeal to their own voters because of the nearing election.
Friday's agreement would devolve powers to Belfast while also honoring the DUP's request to change the oversight of loyalist parades.
The Northern Irish Assembly will vote on the agreement on March 9, with the devolution process starting as early as April 12.