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Armenia and Azerbaijan say they will move towards normalising relations, and will exchange prisoners captured during recent fighting in Nagorno-Karabakh.

The two neighbours have been involved in a decades-long conflict over the disputed territory.

In a joint statement released on Thursday night, the two countries said they saw a "historical chance" for "long-awaited peace".

Both countries said they hoped to sign a peace treaty by the end of the year.

Azerbaijan's lightning military offensive in September brought an end to three decades of ethnic Armenian rule in the Nagorno-Karabakh region, recognised internationally as Azerbaijani territory.

Most of its 120,000 ethnic Armenians fled to neighbouring Armenia.

The two countries announced on Thursday that they would work towards signing a full peace treaty based on mutual respect for each others' territorial integrity.

Baku is releasing 32 Armenian military servicemen and Yerevan is releasing two military servicemen, as a "gesture of goodwill".

European Council President Charles Michel welcomed the statement as a "major breakthrough in Armenia-Azerbaijan relations". The US praised "an importance confidence-building measure".

Other moves include Armenia's support of Azerbaijan's bid to host the COP29 climate summit by withdrawing its own candidacy. Azerbaijan has agreed to support Armenia's candidacy of a regional group associated with the climate talks.

The two countries also called on the international community to support their efforts.

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

The two leaders have met on several occasions for normalisation talks mediated by the EU, the US and Russia.

Talks had stalled in recent months after Azerbaijan refused to participate in talks in the US and Spain, claiming bias on the part of Western countries. The two countries resumed talks again at the end of October in Iran.