TEGUCIGALPA: Honduras' de facto leader Roberto Micheletti and ousted President Manuel Zelaya have reached a deal aimed at ending the political crisis that has paralysed the country for four months.

Pending Congress' approval on Friday, the accord reinstates Zelaya as president, following the June 28 coup that polarized Honduras and subjected it to international sanctions.

"I am pleased to announce that a few minutes ago my negotiating team signed an agreement that marks the beginning of the end" of the standoff, Micheletti said late Thursday in a statement at the presidential palace.

In response, Zelaya expressed his "satisfaction and optimism" at the deal, which he said was set to bring the "return of democracy to the country."

As part of the deal, which also allows the formation of a national unity government, Zelaya must drop his plans to try to change the constitution so as to stand again in elections, which angered the country's elite and prompted the coup.

In the following months the United States, European Union and International Monetary Fund all applied aid freezes to the impoverished Latin American nation.

The agreement, largely authored by Costa Rican President Oscar Arias, a pivotal mediator in the crisis, also calls on the international community to lift all sanctions, recognize the November 29th presidential electionsand send international election observers to oversee the polls.

In Islamabad, US Secretary of State Hillary Clinton hailed the agreement as "historic."

"I cannot think of another example of a country in Latin America that, having suffered a rupture of its democratic institutional order, overcame such a crisis through negotiation and dialogue," Clinton told reporters as she wrapped up a three-day visit to Pakistan.

Delegations from both parties, who held a marathon round of meetings on Thursday, still need to establish a timetable to implement the agreement.

"These things are not going to be solved overnight, but in the coming days," said Zelaya said.

The rivals had been told Thursday by Thomas Shannon, the US assistant secretary of state for western hemisphere affairs, that they must reach an accord to ensure international support for the elections next month.

After Micheletti signed onto the agreement, Shannon, in the country to spur the tense talks, described both negotiating teams as "heroes of democracy," and praised the rivals' political leadership.

He also said he would extend his stay in Honduras to Friday, when lawmakers are set to vote on whether to approve Zelaya's reinstatement.

Since Zelaya's surprise return to the country in September, when he became holed up in the Brazilian embassy, protests supporting his return to power have shaken the capital.

Negotiators for Zelaya and Micheletti earlier Thursday returned to the table as security forces once again used batons and tear gas against hundreds of pro-Zelaya protesters.

Hundreds of Zelaya supporters, blocked from demonstrating by a clampdown on civil liberties, have still faced off all week with police and soldiers in various parts of Tegucigalpa.

"We have several injured and at least 10 have been detained," resistance leader Rafael Alegria told AFP on Thursday.

Micheletti said he was "immensely" thankful for the contributions of the United States, the Organization of American States (OAS) and Arias for their work to resolve the crisis.

"Without a deal it will be difficult for the inter-American community to support the elections," Thomas Shannon, the US assistant secretary of state for western hemisphere affairs, had earlier warned the rivals.

Shannon said Honduras needed to regain foreign support to legitimize the November polls, adding that such support would ensure Honduras' "reintegration in the international community and (reopen) the doors of international financial institutions."