Malaysia has been mediating peace talks between Manila and the 12,000-strong Moro Islamic Liberation Front (MILF) separatist group that has been fighting for more than two decades to set up an Islamic state in the southern third of the Philippines.
The latest round of talks ended on Friday with a breakthrough on the central contentious issue of "ancestral domain," the MILF and the government said in a joint statement.
Manila and the MILF signed a ceasefire in 2001 and opened peace talks but one of the stumbling blocks was the rebels' demand for recognition of their "ancestral domain," or areas once inhabited by Muslims in the southern region of Mindanao.
The latest talks ended "with the parties successfully concluding the most difficult hurdle in the ancestral domain agenda," the joint statement said.
"With this breakthrough, the peace process is on track to complete the ancestral domain agenda before the end of the year," following the talks held in Kuala Lumpur on Thursday and Friday, the statement added.
It did not say how the two sides had resolved most of the issues concerning ancestral domain.
Officials previously said recognising Muslims' "ancestral domain" might infringe on existing property rights and areas under the jurisdiction of local governments.
"With this breakthrough, the peace process is on track to complete the ancestral domain agenda before the end of the year"
MILF and Philippine government joint statement
Muslims, who once inhabited most of the southern Philippines, have said that they had been eased out of many of their territories by centuries of Christian migration.
During the talks, both sides also recognised the need to wind up military operations in the south against Muslim kidnapping and other groups not covered by the ceasefire.
They also called for "closer coordination" to prevent clashes between armed forces and MILF fighters who are in the area.
The MILF sought recognition of
ancestral domain in Mindanao
Both sides agreed that "appropriate relief and livelihood assistance," would be extended to civilian communities affected by the operation against the Abu Sayyaf, which Washington and Manila say are "linked to Al-Qaida".
The two sides thanked Malaysia, Libya and Brunei for providing international monitors to oversee the ceasefire and said "other countries will be invited to participate in the monitoring process," although they did not identify them.
The statement did not say when the next round of talks would be held.