Rival Cypriot leaders say they have made progress at talks aimed at reunifying the divided island.
Demetris Christofias, the Greek Cypriot president, and Mehmet Ali Talat, his Turkish Cypriot counterpart, on Tuesday agreed in principle that any settlement should create a single state with common citizenship for all residents.
"The two leaders met today in a positive and co-operative atmosphere," Taye-Brook Zerihoun, the United Nations secretary-general's special envoy for Cyprus, said.
"They discussed the issues of single sovereignty and citizenship, [on] which they agreed in principle."
Citizenship has been a key concern for Greek Cypriots who have tried to limit the number of naturalised mainland Turks since Turkey's 1974 invasion.
According to the results of a 2006 census in the breakaway Turkish republic of north Cyprus, 34,370 people, or 13.4 per cent of the population, hold both Turkish Cypriot and Turkish citizenship while about 70,500 people, or 27.5 per cent, were categorised as Turkish citizens.
The sovereignty issue in turn has been a key concern for the Turkish Cypriots who have demanded that the federation of the two communities foreseen in the UN-brokered peace talks must be an entirely new creation.
The Greek Cypriots by contrast have argued that it should be a continuation of their Cyprus Republic, which is currently recognised by every government except Ankara.
Zerihoun hosted a four-and-a-half hour meeting at his official residence inside the UN-patrolled buffer zone that has separated the communities for more than three decades.
He said that Christofias and Talat reviewed the work of expert committees from both sides, who have been meeting since April to prepare for full direct negotiations between the two leaders.
Jose Diaz, a UN spokesperson, hailed the progress made in the meeting.
"It's a positive statement and moves us forward on what is seen as a complicated issue," he said.
"Before the meeting it was not a foregone conclusion that the leaders would reach agreement."
Diplomats had been keen to see progress from Tuesday's meeting - the third between the two leaders in as many months - as the momentum in the reunification process had been slowing.
Christofias was elected president in February on a platform of reviving reunification talks which had slowed down under Tassos Papadopolous, his predecessor.
But initial euphoria about the prospects for a Cyprus settlement have been dampened as both sides have found it difficult at the committee level to agree over the sensitive issues of property, territory, sovereignty and security.
Last week George Iacovou, Christofias' chief aide, said that little progress was being made in the committees and that reunification talks were unlikely to be launched before September.
"This is one of the most important meetings they have had because the three-month deadline since March has passed and we should be moving towards direct negotiations," an EU diplomat said ahead of Tuesday's meeting.
On March 21, the two leaders reached a landmark agreement to enter fully-fledged peace talks after four years of virtual stalemate following the 2004 rejection by Greek Cypriots of a UN reunification blueprint.
They met again in May and decided to review progress made by technical committees.
The Greek Cypriots are adamant that real progress at the committee stage must be achieved if face-to-face talks are to have any chance of success, while the Turkish Cypriots say any difficulties can be resolved at the negotiating table.
The Mediterranean island has been divided since 1974 when Turkish troops occupied its northern third in response to an Athens-engineered Greek Cypriot coup seeking union with Greece.