A group of armed Muslim rebels that has been fighting for four decades to establish an independent Islamic state on the island of Mindanao has reached an agreement with the Philippine government that finally lays out a path to peace.

The Moro Islamic Liberation Front and the government of President Benigno Aquino agreed this week to the broad outlines of a deal that would create a new semi-autonomous government on Mindanao, the second largest island in the Philippines. If the agreement holds, it would mean the end of an insurgency that has taken an estimated 120,000 lives.

The pact would replace the existing Autonomous Region of Muslim Mindanao – which President Aquino called "a failed experiment" from a previous, unsuccessful peace agreement – with a new entity called Bangsamoro, in recognition of the cultural heritage of the indigenous Moro tribal people who inhabit Mindanao.

A conflict centuries in the making

The Philippines, a sprawling nation of more than 7,000 islands dotted across 300,000 sq km of the South Pacific, is overwhelmingly Catholic, a legacy of Spanish colonisation. But the southern islands have a predominantly Muslim population which has lived in Mindanao since the 13th century, predating the arrival of the Spanish who eventually took over the whole country.

After the second world war, the government encouraged Christian settlers from the north to move to the resource-rich south, increasing the Moro's long-standing sense of grievance. Political, cultural and economic frictions eventually led to armed separatist attacks that began in the 1970s and grew over the years.

Long road ahead

This week's peace agreement is far from the end of the story: it's not so much a final deal as a road map for getting there. Previous efforts to negotiate an end to this conflict have broken down several times, leading to new and sometimes worse violence. Old clan rivalries among the Moro have complicated negotiations in the past. There are smaller militant groups that are not part of the deal and at least one splinter group says it won't take part.

But there are reasons for optimism, too. The fact that the militants have surrendered their push for full independence and are willing to accept a government with limited autonomy is a landmark concession. Also, this agreement has broader political support than some in the past. A deal in 2008 fell apart when Christian groups objected and the supreme court overturned it. This time there have been political consultations with a spectrum of groups to get everyone on board.

"This framework agreement is about rising above our prejudices," President Aquino said. "It is about casting aside the distrust and myopia that has the plagued efforts of the past."

In other words, this is the best chance for peace in a generation, and it's cautious good news for everybody.

Read more: AlertNet, the humanitarian news service, has an excellent backgrounder on the conflict.

Sources: Financial Times, CIA, Philippine Country, AlertNet, BBC, New York Times, Office of the President of the Philippines