However, the text of the agreement did not say when the monitor group will be operational or set a date for the next round of talks.

Nor does the pact specify who will choose the members, but the wording suggests it would be done by both parties together.

Hundreds killed

Manila hailed the step as a "major breakthrough'', saying the deal had moved the peace process forward.

Avelino Razon, the presidential peace talks adviser, said the agreement would pave the way for formal negotiations to resume soon, followed by a final peace agreement.

"The time has come to end the fighting now ... I believe that peace is within our grasp,'' he said.

Talks had collapsed in August 2008 after the Philippines Supreme Court declared unconstitutional a preliminary accord on an expanded Muslim autonomous region in Mindanao and refused to sign.

The stalled agreement sparked months of clashes that killed hundreds of people and displaced more than half a million.

The MILF has been fighting for Muslim self-rule in Mindanao for decades. The island is home to a majority of Muslims who form a small minority in the largely Roman Catholic Philippines.