KUALA LUMPUR - The Philippine government and the country's largest Muslim rebel group hope to sign a deal by April next year to end a four decades-long conflict that has killed 120,000 people, a Malaysian mediator said on Wednesday.

Both sides have also agreed to allow back international monitors and the reactivation of a joint group to isolate militants and criminal gangs in rebel areas, said Othman Razak, who brokered two days of talks in Kuala Lumpur.

"We have agreed to begin negotatiations on a comprehensive compact," Othman told reporters. "We hope to sign probably by the end of the first quarter of next year, by March or early April."

The Philippines and the Moro Islamic Liberation Front (MILF) have been talking on-and-off for 12 years to end the conflict in the southern Philippines.

As well as deaths, the fighting has displaced 2 million people and scared off potential investors in a region that is believed to be sitting on huge oil and gas deposits.

The International Monitoring Team (IMT) and the Ad Hoc Joint Action Group (AHJAG) pulled out more than a year ago after an escalation of violence in Muslim areas in the south of the country.

The Philippines ended peace negotiations in August 2008 after a deal to expand an existing Muslim autonomous region in Mindanao was halted by the country's Supreme Court, angering rogue elements of the MILF.