The cabinet released details of an amnesty plan on Tuesday evening that extends a deadline for rebels to surrender and offers financial compensation to families of disappeared people and financial aid for families of rebels killed in the fighting during the 1990s.
"I am very optimistic about Algeria's future," said Abdelaziz Belkhadem, the leader of the National Liberation Front (NLF), the dominant partner in a ruling coalition.
"Among the positive points of the text is the fact that families who suffered will get compensation."
Although the statement gave no details of how much would be paid, similar exercises in the past in the wake of natural disasters have seen bereaved families get about $7000 each.
Compensation could be expensive, but high oil and gas prices have given Algeria, an oil exporter, deep pockets.
Mahmoud Belhimer, a university professor and editor, sounded a note of caution. "Money helps to solve a crisis. The government will compensate everybody," he said.
Belkhadem, the NLF leader, is
optimistic about Algeria (file)
"But what if oil prices fall? You already know that Algeria is confronted by a serious social crisis. Therefore, if nothing is done to generate economic growth, we may go back to zero."
Africa's second-largest country plunged into war in early 1992 after military-backed authorities scrapped a parliamentary election won by Islamists.
The violence cost about 150,000 lives and more than $20 billion in economic losses.
The statement gave guerrillas still fighting the authorities six months to surrender and be pardoned provided they were not responsible for massacres, rapes and bombings of public places.