In a landmark decision paving the way for Maoists' joining the political mainstream in Nepal, the rebels on Friday agreed to join an interim government and dissolve the administration in areas under their control.

The government on its part agreed to dissolve Parliament and conduct elections to a constituent assembly, meeting a key demand of the rebels, said a joint press statement issued after the first ever face-to-face talks between Prime Minister Girija Prasad Koirala and Maoist chief Prachanda.

"This is a historic decision and will move the country in a new direction," Prachanda told a crowded press meet after the talks that lasted over 10 hours.

"We reached an eight-point understanding to get the country ahead of the current crisis," said Home Minister Krishna Sitoula, who also led the government's peace negotiation team.