Pakistan is to reopen crucial supply routes to Nato-led forces in Afghanistan after Washington apologised for killing 24 of its soldiers in November, the US has announced.
US Secretary of State Hillary Clinton said: "We are sorry for the losses suffered by the Pakistani military."
Pakistan confirmed the Nato supply lines would reopen.
The routes are increasingly important as Nato prepares to withdraw all combat troops from Afghanistan in 2014.
The row over the supply lines has been hugely damaging to relations between Pakistan and the US.
The dispute began in November last year when two dozen Pakistani soldiers were killed as US air strikes hit two posts on the Afghan border.
At the time, Afghan officials said that Nato forces had been retaliating for gunfire from the Pakistani side of the volatile border, but Pakistan rejected that claim.
Mrs Clinton made the announcement in Washington after talks by phone with her Pakistani counterpart, Hina Rabbani Khar.
"I offered our sincere condolences to the families of the Pakistani soldiers who lost their lives," she said in the statement.
"Foreign Minister Khar and I acknowledged the mistakes that resulted in the loss of Pakistani military lives.
"We are sorry for the losses suffered by the Pakistani military. We are committed to working closely with Pakistan and Afghanistan to prevent this from ever happening again."
Islamabad confirmed it would not raise transit fees when the lines re-open.
US officials say the existing charge of $250 (£160) per truck will not change - Washington had balked at a Pakistani demand for $5,000 per container to let supplies flow again.
The BBC's Kim Ghattas says Washington had resisted saying sorry as there is deep anger among Americans about the death of US soldiers in Afghanistan from attacks by militant groups with alleged connections to Pakistan's ISI intelligence agency.
Shortly before Tuesday's US announcement, Pakistani Prime Minister Raja Pervez Ashraf said that the issue had damaged his country's relations with the US, as well as the 49 other member states of Nato.
During the dispute the US reduced its reliance on Pakistan by using a more costly route through Central Asia.
US Defence Secretary Leon Panetta welcomed Pakistan's decision on Tuesday.
"We remain committed to improving our partnership with Pakistan and to working closely together as our two nations confront common security challenges in the region," he said in a statement.
General John Allen, the US commander of Nato troops in Afghanistan, said the decision to open the supply lines was "a demonstration of Pakistan's desire to help secure a brighter future for both Afghanistan and the region at large".
Gen Allen had held talks in Islamabad twice in the last six days.
In mid-April, Pakistani lawmakers unanimously approved new guidelines for bilateral ties with the US, but demanded that the country provide an unconditional apology for the November attack, and stop drone strikes.
The vote was not explicitly linked to the supply lines, but correspondents say the stalemate worsened because the US stopped short of a full apology for the troop deaths.
The standoff cast a diplomatic shadow over a Nato summit two months ago in Chicago where correspondents said US President Barack Obama snubbed his Pakistani counterpart, Asif Ali Zardari.
Relations between the US and Pakistan were severely strained for much of last year, reaching crisis levels following the killing of al-Qaeda leader Osama Bin Laden by US forces in Pakistan in May.----
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