The treaty between Pervez Musharraf, Pakistan's president, and Pakistani pro-Taliban fighters, comes five years after Musharraf bowed to US pressure to withdraw support for the Taliban in Afghanistan.
Ahmed Rashid, a Pakistani journalist and author of 'Taliban' said: "I think it is a blow. Whether we like it or not, it has set up a safe haven for al-Qaeda and the Taliban."
Samina Ahmed, of the Brussels-based International Crisis Group (ICG), a non-governmental organisation aimed at preventing and resolving conflicts, said: "They've ceded North Waziristan to the Talibs."
Afghan, US and other Nato countries with troops fighting the Taliban across the border are likely to be disturbed by Pakistan's effective retreat.
Officials vigorously reject such conclusions, just as they have rejected repeated accusations that Pakistan has not done enough to stop Taliban fighters crossing the border.
George Bush, the US president, said he does not see the deal giving safe haven to fighters who might be hiding in tribal lands.
In an interview on Thursday Bush said: "I don't read it that way."
Accusations refuse to go away that Pakistani agents are supporting the Taliban in Afghanistan with training, arms and cash as part of a strategy to gain influence in the country.
Though analysts say the US administration does not want to risk destabilising a valued ally, the US media appears to be sharpening its knives for a visit by Musharraf later this month.
On Thursday the New York Times quoted Seth G Jones, a political scientist at the Rand Corporation think tank, saying Pakistani agents have helped hide Taliban leader Mullah Mohammed Omar, and tipped off fighters on US-led forces' movements.
However, Washington routinely commends Musharraf's efforts to rein in al-Qaeda, though Osama bin Laden remains at large, supposedly somewhere on the Afghan-Pakistan border.
In early 2004, after al-Qaeda-inspired attempts on his life, Musharraf ordered an offensive in South Waziristan which later moved north, taking the fight into two of the most recalcitrant of Pakistan's seven semi-autonomous tribal agencies.
Al-Qaeda nests were found, but the army also came into conflict with pro-Taliban tribesmen.
The army became bogged down fighting what many Pakistanis regarded as a US war, while it was also being criticised for brutally quelling a nationalist revolt in the southwest province of Baluchistan
During the Waziristan campaign, the army lost 220 men, while more than 700 were wounded.
Rashid said: "I think this agreement has been triggered most keenly by Musharraf in order to placate his constituency, which is the army."
Waziristan, both north and south, has been left in a mess by the fighting. In the south, the army signed a treaty two years ago and retreated to barracks.
Since then, Pakistani Taliban have virtually ruled the roost with their leaders openly boasting of sending fighters to Afghanistan.
They have set up a parallel administration, and have begun "Talibanising" so-called settled areas near the tribal lands.
Critics say the fighters in North Waziristan have got what they wanted - prisoners released, troops back in barracks, checkpoints removed, weapons given back and money paid out.
Moreover, the pro-Taliban Islamist party that brokered the accord has gained power and influence.
The Jamiat Ulema-e-Islam faction, led by Fazal-ur-Rehman and known as the JUIF, is already a member of the governments in Baluchistan and North West Frontier, the two provinces bordering Afghanistan.
"It's like putting the fox in charge of the hen house," was how one diplomat characterised the JUIF's ascendancy.
In return, the government received pledges from tribal leaders not to attack its troops, or forces across the border.
But the frontier's history is littered with broken peace deals.
ICG's Ahmed said: "None of them have been honoured. Why should we assume this time round it is going to be honoured?"