The truce, signed in Helsinki, Finland and mediated by former Finnish President Martti Ahtisaari, could end one of Asia's longest running conflicts.
This is a "very happy, thankful and historic day," Indonesian President Susilo Bambang Yudhoyono said. He expressed gratitude to GAM members for working to "reunite with the big Indonesian family to build a better future in Aceh," Reuters reported.
The most recent spate of violence erupted more than 30 years ago over the right to control natural resources in the oil-rich province, but is the latest wave of the fight for Aceh's independence that dates back more than a century that has included resistance to both Dutch colonial and Indonesian rule. Since the 1970s, rebel forces have battled government troops, a conflict that has left some 15,000 people -- mostly civilians -- dead.
The main terms of Monday's peace deal call for rebels to end their fight for independence, demobilize GAM's 3,000-strong army, and hand over arms to the Aceh Monitoring Mission, a group run by monitors from the European Union and several Southeast Asian countries, by Sept. 15.
Indonesia has pledged to remove more than half of the 30,000 soldiers that remain in Aceh, in a phased withdrawal scheduled to begin Aug. 18, and to provide former GAM members amnesty.
Aceh will enjoy a degree of autonomy as part of the deal. The mostly Muslim province will write its own laws and have the right to form local political parties, a right generally banned under Indonesian law, the New York Times reported.
Aceh will also receive 70 percent of the revenues from oil and gas reserves, up from the 55 percent of oil and 40 percent of gas revenues it currently gets. The former rebel stronghold also will have the right to seek separate foreign loans and encourage foreign investment, according to Reuters.
In addition, Indonesia has promised to establish a human rights court and a truth and reconciliation commission to help bring justice to the multitude of human rights crimes committed in the war-ravaged province.
"This peace process has required a leap of faith from GAM," Malik Mahmud, head of the GAM delegation, said at the signing. "It is a leap of faith we have taken to give the people of Aceh the opportunity to build a brighter future."
Ahtisaari called the signing "the beginning of a new era for Aceh," but said, "Much hard work lies ahead."
Though EU and Asian officials hope this latest truce will open the door for additional aid to rebuild parts of Aceh destroyed by the tsunami, a failed 2002 truce and rumblings of continued aggression in the province have cast a shadow over the deal.
Government forces have clashed with GAM rebels since July when leaders agreed to the deal, a rebel died Saturday in fighting and GAM claims militias who have broken with government troops may be slow to disarm.
"Militia members have recently been saying that after GAM is disarmed, they will kill GAM members," Mahmud said, according to Reuters.
"If GAM defends itself against these militias it will be the excuse the military is looking for to relaunch military operations against GAM. This will end the peace process," he added.
If the truce is maintained, foreign aid in the amount of $5 billion could begin flowing into Aceh.