President Benigno Aquino hailed the agreement with the Moro Islamic Liberation Front, but said "contentious" issues remain, the Manila Bulletin reported Tuesday.
Aquino said the next and likely final round of negotiations with the MILF could be even more difficult as it involves convincing the rebel group's 12,000 fighters to hand over their weapons and return to mainstream society.
"This isn't going to be simple because we would have to demonstrate our full trust in each other," Aquino said. "When we talk of normalization, this will mean their return to the fold of the law and one aspect is the safeguarding of their arms."
The newspaper gave no details of the latest agreement, but two previous deals focused on the Manila government's powers including defense, foreign policy, coinage and citizenship.
An elected government for the region will operate under laws based on Islamic Sharia law. The region's administration will have tax-raising powers, more say over foreign investment and, importantly for the MILF rebels, much more authority over natural resource development.
The outcome of continued discussions with the MILF, being held in the Malaysian capital Kuala Lumpur, will be an autonomous Muslim-majority region covering about the same area as the existing Autonomous Region in Muslim Mindanao, which Aquino has said is a "failed experiment."
Mindanao has a population of about 22 million is the second largest and southernmost island in the Philippines.
Between 120,000 and 150,000 people are estimated to have been killed in the struggle between government troops and rebel groups seeking an independent Mindanao region.
The latest agreement on power-sharing is another step toward ending the conflict, a task that Aquino set for himself publicly during his inauguration in early 2010. He challenged rebel groups to call a cease-fire and sit down for peace talks.
"Are you prepared to put forth concrete solutions rather than pure criticism and finger-pointing? If it is peace you truly desire, then we are ready to call for an immediate cease-fire," Aquino said at the time. "Let us go back to the table and begin talking again."
Aquino's government and MILF rebels agreed in early 2011 to set up a peace process leading up to the creation of Bangsamoro sometime in 2016, around the end of Aquino's first term as president.
The MILF came into existence in 1981 when a group split from the Moro National Liberation Front, a more hard-line rebel group blamed for much of the continuing violence in the region.
The government in Manila has had on-and-off talks, including peace agreements and cease-fires, with the MILF for more than a decade.
During kidnapping incidents in the region, the government has worked with the MILF to facilitate the freeing of hostages.
In November 2009, the MILF helped behind the scenes to successfully free the Rev. Michael Sinnott by negotiating with disaffected rebel factions who were holding the Catholic priest.
Despite the new agreement, peace could remain illusive, an analyst told the Manila Times newspaper.
"Building peace is one thing, ending internal wars is another thing. The government is just ending armed conflicts with the MILF," Rommel Banlaoi, executive director of the Philippine Institute for Peace and Violence Terrorism Research, said.
"The greater challenge is for the central government and the proposed Bangsamoro government to effectively deal with those armed groups that have the capability to undermine the peace dividends," Banlaoi said.
Other armed groups operating in the region apart from the MNLF include the Bangsamoro Islamic Freedom Fighters, Abu Sayyaf and the Indonesian group Jemaah Islamiya.
"The greatest challenge to peace building in Mindanao is the taming of wild oligarchs who maintain some non-state armed groups involved in many types of violence," Banlaoi said.
A faction of the MNLF, led by Nur Misuar, stormed and laid siege to areas of Zamboanga City Sept. 9. About 100,000 people fled the city, leading Aquino to issue an ultimatum to the rebels to end the siege or face an attack.
More than 100 people died during the ensuing clashes between MNLF rebels and security forces before the siege was lifted.
Notable deaths of 2014 [PHOTOS]