Yemen's government and Shi'ite Muslim Houthi rebels signed an agreement on Thursday to end a crisis that has seen weeks of sometimes bloody protests in the capital Sanaa, a member of the government's negotiating team said.
Houthi protesters have been blocking the main road to Sanaa's airport and holding sit-ins for weeks at ministries in an attempt to oust the government and restore fuel subsidies, Reuters reported.
The negotiator told Reuters the agreement was signed by Sanaa's governor, Abdelqader Helal, and Houthi representative Hussein al-Ozzi, who is in charge of political affairs.
The agreement includes a further reduction of fuel prices and the formation of a new government, the source added. He said he expected the Houthis to dismantle the protest tent sites after the new government is formed.
The Defence Ministry's website said: "A political breakthrough is imminent and there are negotiations to name a new prime minister".
Mohammed al-Bekheity, a member of the Houthi's politburo was optimistic about the latest deal. "Communications [with the government] are back and God willing, this is the beginning of a breakthrough," he told Reuters.
But Mohammed Abdulsalam, a spokesman for the Houthis, said on his Facebook page: "Until now, we have not reached a final agreement or signed a deal and communications are continuing".
The stability of Yemen is a priority for the United States and its Gulf Arab allies because of its strategic position next to top oil exporter Saudi Arabia and shipping lanes which run through the Gulf of Aden.
The decade-old Houthi insurrection is just one of several security challenges in a country which is also home to one of al Qaeda's most active wings
Earlier this month president Abd Rabbu Mansour Hadi put forward a deal in which he announced fuel price cuts of about 30 percent and which called on the Houthis to join a new unity government - a broad compromise deal that the Houthis rejected.
The Houthis have centred their protest on a call for recent fuel price rises to be reversed after the government lifted subsidies in July which it had been struggling to pay.
Fighting has been going on intermittently for months in the north between the Houthis, who carry the name of their leaders' clan, and Sanaa-backed tribes.
Attempts to involve the Houthis in mainstream politics in the aftermath of the 2011 Arab Spring protests and the ousting of Yemen's long-time President Ali Abdullah Saleh, an arch-enemy of the Houthis, have failed, and the group has returned to its more radical and isolationist ways.
The Houthis, who follow the small Zaidi branch of Shi'ite Islam, first launched their uprising against the central government in Sunni-dominated Yemen in 2004, and fought several bitter wars against it in the years that followed.