All the parties voted unanimously in a series of votes, the exception being Sinn Fein's opposition to a section on arms decommissioning. However, the development was hailed as a significant breakthrough in a joint statement from Tony Blair and the Taoiseach, Bertie Ahern.
The Prime Minister said: "I am delighted at today's agreement in Belfast to launch formally the substantive negotiations on a lasting political settlement for Northern Ireland and set up the independent commission on decommissioning. We and others have worked hard to achieve this."
David Trimble, the Ulster Unionist Party leader, said: "Sinn Fein are taking the first faltering steps towards an acceptance of partition."
Gerry Adams, Sinn Fein's president, said: "This is an historic day. There is a heavy onus on all the parties to now get down to the real and urgent business of making progress."
Earlier, the British government rejected an Ulster Unionist demand for the expulsion of Sinn Fein on the grounds that the party contained "unreconstructed terrorists" who remained uncommitted to principles of non-violence and democracy.
Mo Mowlam, the Secretary of State for Northern Ireland, declared that the party had not breached the six Mitchell principles. Despite protests, Mr Trimble's Ulster Unionists, accepted the ruling, having committed themselves by making it clear that they would remain in the talks process even if they lost out on the expulsion issue.
It was also announced that the Canadian general, John de Chastelein, would head the international body which is to deal with the issue of arms decommissioning in parallel with the political talks.
Opinions differed, however, on whether the issue had been effectively set aside or simply parked to be the subject of further controversy at a later stage.
The substantive negotiations have been organised into three strands dealing with the internal administration of Northern Ireland, North-South relations and over-arching relations between the United Kingdom and the Republic of Ireland.
1 Hillary Clinton will visit Belfast next month to pay tribute to the peace activist Joyce McCarten, the White House said yesterday. She will speak at the University of Ulster, which is dedicating a scholarly post to Mrs McCarten, who died last year after founding a support group for women whose children have been killed in the conflict.