"We have a deal," Koffi Annan, chairman of the mediation talks said triumphantly at the terrace of the president's office.

The deal came through after talks stalled Tuesday and ODM announced mass rallies countrywide that would have started Thursday. But the party postponed them after talks with Annan and the arrival of the African Union chairman, Jakaya Kikwete of neighboring Tanzania.

The deal brings about the office of the Prime minister and two deputies. For the second time in Kenya's history there will now be a prime minister the first one being the country's founding president, Jomo Kenyatta.

The PM's position which was the most contentious issue shall have executive authority while the President remains the head of state.

The deal will also allocate Cabinet posts based on each party's strength in Parliament. Odinga's Orange Democratic Movement has the largest number of seats.

"The real challenge now is for president Kibaki and Raila to work together to heal and reconcile this nation," Annan said.

Since a disputed election in December 27th more than 1,000 people have been killed and 350,000 displaced in ethnic clashes that have sparked off deep-seated anger on historical injustices silently borne by the Kenyan poor who live on the fringes of the economy.

Nearly half the population lives on a dollar a day despite a booming economy that was heading towards 7 percent growth this year.

Parliament opens next Thursday to move a constitutional motion to create room for the offices of the premier and his two deputies who will be nominated with one post each for the ruling PNU and ODM.

Only parliament can sack the premier through a no-confidence vote of two thirds majority.

Raila Odinga in an ecstatic mood said: "This crisis has taught Kenyans a serious lesson that will help her forge a foundation."

When news of the deal filtered out, a carnival mood engulfed Orange party strongholds around the country. In the Kibaki stronghold of central Kenya, the announcement led to a sigh of relief as the country now sets its sight on the task of rebuilding.

President Mwai Kibaki said: "The agreement we have reached forms a comprehensive partnership between the government coalition with the ODM's a new partnership will strengthen the government in addressing challenges facing the country more comprehensively, it is in order that in particular we deal with the problem of negative ethnicity, national cohesion and unity."