Historic day: The two leaders sat side by side

Ian Paisley and Gerry Adams, sitting side by side for their first news conference in Stormont, confirmed that power-sharing would begin on 8 May.

Mr Paisley said the DUP was committed to full participation in government and Mr Adams said it was a "new era".

Tony Blair said it was a very important day for the people of Northern Ireland.

The British and Irish governments had said they would shut the assembly if an executive was not agreed on Monday.

The Stormont Assembly was due to meet at noon to appoint ministers to a devolved government.

Instead, the two party delegations met at Parliament Buildings, Stormont.

Mr Adams - wearing his Easter lily to commemorate those who died in the 1916 rebellion - and Mr Paisley were juxtaposed at one corner of a table.

Gerry Adams

After the meeting, Mr Paisley said: "Our goal has been to see devolution returned in a context where it can make a real, meaningful improvement in the lives of all the people of this part of the United Kingdom.

"On Saturday, the DUP executive overwhelmingly endorsed a motion committing our party to support and participate fully in government in May of this year - this is a binding resolution."

Mr Adams said he welcomed Mr Paisley's statement.

"I believe the agreement reached between Sinn Fein and the DUP - including the unequivocal commitment made by their party executive and reiterated today - to the restoration of political institutions on 8 May marks the beginning of a new era of politics on this island," he said.

"The basis of the agreement between Sinn Fein and the DUP follows Ian Paisley's unequivocal and welcome commitment to support and participate fully in the political institutions on 8 May."

Prime Minister Tony Blair said it was "a very important day for the people of Northern Ireland, but also for the people and the history of these islands".

"Everything we have done over the last ten years has been a preparation for this moment."

Irish Prime Minister Bertie Ahern said this had "the potential to transform the future of this island".

"This morning saw unprecedented and very positive developments in Northern Ireland."

Water 'reprieve'

Both Sinn Fein and the DUP have asked the British government not to issue water bills due to be sent out this week for the first time.

SDLP leader Mark Durkan while welcoming the development, said he could not understand why devolution could not happen on Monday.

The Ulster Unionist leader Sir Reg Empey said the DUP could have got the same deal much earlier.

Earlier on Monday, Secretary of State Peter Hain said Northern Ireland's devolution deadline might be allowed "to slip" for a few weeks if the parties agreed to work together.

He said the assembly would be dissolved if agreement was not reached by 26 March.

An order signed by the NI secretary restarted devolution at midnight.

In the assembly election earlier this month, the DUP and Sinn Fein emerged as the two largest parties.

Chancellor Gordon Brown promised an extra £1bn if devolution was back on Monday on top of £35bn pledged by the government over four years.

If a power-sharing executive is formed, it will have four DUP ministers, three Sinn Fein, two UUP and one SDLP.

The Northern Ireland Assembly has been suspended since October 2002, amid allegations of an IRA spy ring at Stormont.

A subsequent court case collapsed. Direct rule has been in place since that date.