The Hizb-i Islami movement, led by Gulb al-Din Hekmatyar, suffered its third split in 10 years on Monday.
Calling itself the Decision Making Council (DMC) and headed by Khalid Faruqi, the group announced it would abandon violence and work with the US-backed government.
Deputy DMC leader Mawlawi Sir Firas said: "Hizb-i Islami wants peace whereas Hekmatyar wants war".
Hekmatyar refuses to recognise the US-backed government in Kabul and his followers continue to struggle for the removal of all foreign troops.
But when contacted by Aljazeera.net on Monday, Sir Firas refused to confirm that Hekmatyar had been expelled from the party or even thrown out of the new breakaway faction.
"All I can say is that since Hekmatyar was expelled from Iran, we have had no contact with him."
Aljazeera.net's correspondent in Kandahar, Hashmat Allah Muslih, said reluctance to expel Hekmatyar was due to his substantial popularity, particularly amongst young urbanites.
Muslih added that it was Karzai's government that had engineered the breakaway group, offering it a return to mainstream politics.
One time prime minister Hekmatyar
"This latest development shows that Karzai's government is attempting to embrace a much broader base of support, even including numerous Taliban factions."
Hizb-i Islami history
Although founded years earlier, Hizb-i Islami emerged as a powerful political force during the 1979-1989 Russian invasion.
Under Hekmatyar's leadership the party became the political arm of one of the mujahidin factions involved in the 1992-1996 civil war which cost tens of thousands of lives.
Also wanted by the Afghan government, Hekmatyar is believed to have joined members of the ousted Taliban government and their al-Qaida allies.