The official Yugoslav news agency Tanjug reported the agreement, entitled "On a peaceful and political settlement of the Kosovo crisis", calls for a temporary government in Kosovo.

"We are going to try to create organs in Kosovo, institutions in Kosovo that will be for all national (ethnic) communities and all citizens," the Yugoslav media reported Mr Rugova as saying in a news conference.

Under the terms of the deal, direct talks - without Western mediation - will be held in the near future.

They will reportedly focus on giving the province a large degree of self-administration.

A Yugoslav Foreign Ministry spokesman, Neboisha Vuiovich, is reported as saying the joint statement would be "a serious step" in the search for a settlement in Kosovo.

TV appearance

Mr Rugova, was shown on Yugoslav television, holding talks with the Yugoslav President Slobodan Milosevic, shortly after the Nato air strikes began last month.

The Kosovo Albanain leader, a pacifist, publicly criticised Nato's aerial bombing campaign against Yugoslavia.

Both Nato and Mr Rugova's own staff described his appearance as one made under duress and they say he is effectively a prisoner of the Yugoslav authorities.

Belgrade says Mr Rugova is a free man, but is under police protection for his own safety.

Mr Rugova's long-running campaign of non-violent resistance to Serbian rule in Kosovo culminated in his participation in peace talks in France earlier this year alongside President Milutinovic.