Both countries have said a peace agreement could be signed by the end of the year, but peace talks — mediated separately by the European Union, the United States and Russia — have seen little progress.

On Thursday, the two sides agreed in a joint statement to seize "a historical chance to achieve a long-awaited peace in the region".

"The two countries reconfirm their intention to normalize relations and to reach the peace treaty on the basis of respect for the principles of sovereignty and territorial integrity," the statement said.

Baku will free 32 Armenian prisoners of war, while Yerevan will release two Azerbaijani servicemen, according to the statement.

The two countries also said they "will continue their discussions regarding the implementation of more confidence building measures, effective in the near future and call on the international community to support their efforts".

The agreements were reached during talks between the office of Armenia's Prime Minister Nikol Pashinyan and the administration of the President of Azerbaijan Ilham Aliyev.

Armenia's foreign ministry said Yerevan had "responded positively to the offer of US Secretary of State Antony Blinken to organise the meeting of the Foreign Ministers of Armenia and Azerbaijan in Washington".

EU Council President Charles Michel praised the statement Thursday in a post on social media, calling it a "key step".

"Delighted to welcome a major breakthrough in Armenia-Azerbaijan relations as they issue a joint statement," he said.

Aliyev and Pashinyan have met on several occasions for normalisation talks mediated by the European Union.

But the process has stalled over the last two months as two rounds of negotiations failed to take place.

Azerbaijan refused to participate in talks with Armenia that were planned in the United States on November 20, over what it said was Washington's "biased" position.

In October, Aliyev declined to attend a round of negotiations with Pashinyan in Spain, that time accusing France of bias.

French President Emmanuel Macron and German Chancellor Olaf Scholz had been scheduled to join Michel as mediators at those talks.

So far, there has been no visible progress in EU efforts to organise a fresh round of negotiations.

The traditional regional power broker Russia — bogged down in its Ukraine war — has seen its influence wane in the Caucasus.

Aliyev sent troops to Karabakh on September 19, and after just one day of fighting, Armenian separatist forces that had controlled the disputed region for three decades laid down arms and agreed to reintegrate with Baku.

Over the following days, almost the entire Armenian population of the mountainous enclave — more than 100,000 people — fled Karabakh for Armenia, sparking a refugee crisis.

Azerbaijan's victory marked the end of the territorial dispute, which saw Azerbaijan and Armenia fight two wars — in 2020 and the 1990s — that have claimed tens of thousands of lives from both sides.