Taliban militants on Tuesday declared an indefinite ceasefire and vowed to release prisoners in Pakistan's Swat valley, where they have fought for nearly two years to enforce sharia law.
The announcement came eight days after the government signed a controversial deal to accept Islamic law as the only system of justice in Swat, within 100 miles of Islamabad and once Pakistan's only ski resort.
The local government hailed the truce as a step toward permanent peace in the valley, where thousands of people have fled the violence and locals hugged each other in joy Tuesday, as the military vowed to continue to hold fire.
However the sharia deal has triggered alarm in the United States, Europe, Afghanistan and India, amid concerns it will embolden militants in North West Frontier Province which is rife with Taliban and al-Qaeda extremists.
The ceasefire announcement applies to Swat but not to vast areas elsewhere in northwest Pakistan where Taliban and al-Qaeda extremists are holed up.
Militant leader Mullah Fazlullah convened a consultative council on Tuesday and agreed to extend a 10-day ceasefire, which had been scheduled to expire on Wednesday, and release prisoners, his spokesman Muslim Khan told AFP.
'Today the shura met under Maulana Fazlullah and decided to hold a ceasefire for an indefinite period,' Khan said, referring to the council.
Fazlullah's supporters had observed a temporary truce since last Monday, when the government signed the controversial deal with pro-Taliban cleric Sufi Mohammad to enforce sharia law in Swat in an effort to end the insurgency.
Thousands of Fazlullah's supporters have spent nearly two years waging a terrifying campaign to enforce sharia law, beheading opponents, bombing girls' schools, outlawing entertainment and fighting government forces.
'We are releasing all prisoners unconditionally. Today we released four paramilitary soldiers and we will release all security personnel in our custody as a goodwill gesture,' Khan vowed.
No date has been announced for when sharia law would take effect. It is not clear either how the system, which supporters say will be faster than the penal courts, will be implemented or who will be responsible for justice.
Fazlullah will 'announce important decisions' on his illegal FM radio station late Tuesday, his spokesman added.
The commander had said the ceasefire would be made permanent provided he was convinced of government assurances, but past peace deals between the government and militants have quickly unravelled.
Chief military spokesman Major General Athar Abbas said the army had already halted action in Swat and would hold fire.
'Its policy remains the same...the army will not take any offensive action,' he told AFP.
Syed Mohammad Javed, the commissioner of Malakand division, which includes Swat and whose three million inhabitants are affected by the sharia deal, also hailed the announcement.
'We welcome the Taliban's ceasefire announcement from the bottom of our hearts. It is an extremely positive development, which will pave the way for a permanent peace,' Javed told AFP.
'The government is 200 per cent committed to its announcement to enforce sharia...we will take every step which leads to permanent peace,' he added.
Witnesses said residents in Mingora, the main town in Swat, were hugging and congratulating each other in the streets.
'Today, for the first time in two years, we can heave a sigh of relief. We were in deep grief and life was crippled, but the Taliban announcement has brought new hope for peace,' shopkeeper Akbar Ali told AFP by telephone.
Militants have destroyed 191 schools in the valley, including 122 for girls, according to local education official Sher Azfal.
Pakistan Foreign Minister Shah Mehmood Qureshi, who is in Washington as part of a US review in the fight against extremists, has strongly defended the Swat deal despite western alarm.