The agreement includes a promise by each side to recognize the other and for further talks to resume July 25 in the Sudanese capital of Khartoum.
"The parties have committed themselves to cease all verbal provocation and all military action," the secretary general of the Arab League, Amr Moussa, said at the signing ceremony, according to Reuters. "The two parties agreed to reach a compromise that preserves the unity and integrity of Somalia."
Delegation heads embraced after the signing, the news service reported.
Hosted by Sudanese President Omar al-Bashir under the auspices of the Arab League, the meeting aimed to end recent tensions between the interim Somali government and Islamic militias, which in early June wrested control of the capital Mogadishu and areas of the south from warlords after 15 years of unrest and anarchy.
The largely ineffective government, seated outside the capital in the south central city of Baidoa for security reasons, called for international peacekeepers to intervene in the armed conflict. The government echoed U.S. suspicions that Muslim fundamentalists were behind the Islamic militia movement.
On Thursday, in a written compromise that followed Arab League mediation, the government agreed to recognize the "reality" of the Islamic Courts, while the courts agreed to acknowledge the government's "legality."
The Islamic Courts have received widespread backing from many Somali citizens, who claim any stability in the lawless country, even that imposed by Islamic Sharia law, is better than warlord rule.
The meeting, held at a conference center in Sudan, may help avert further conflict in the Horn of Africa nation and could help create a foundation for a stable government for the first time in 15 years.
