The Pakistani military will no longer operate in the area where Osama bin Laden and other top al Qaeda operatives are believed to be hiding, according to terms of what the Pakistan government calls a "peace deal," signed today with militant tribal groups allied to the Taliban and al Qaeda. It is a stunning setback for U.S. efforts to root out al Qaeda and Taliban strongholds. The agreement, signed in the North Waziristan district of Pakistan’s volatile tribal belt, calls for the military to return to its barracks and for the insurgents to stop launching attacks on Pakistani troops. "The army will pull back to its camps," spokesman Major General Shaukut Sultan told ABC News. "They will not undertake any terrorist activity. There will be no parallel government, and foreigners will leave the area." Extremist tribal leaders in North and South Waziristan had virtually taken over in recent months. They imposed Taliban-style law in their districts, held public executions and were openly recruiting fighters for ‘jihad’ against U.S. troops across the border in Afghanistan. Though the military will not release exact figures, they also killed and injured hundreds of Pakistani soldiers in roadside bombs and suicide attacks. The ongoing military operations in the tribal belt were so unpopular here — many accuse President Pervez Musharraf of fighting America’s War on Terror with Pakistani blood — analysts say the general had to stop the bloodshed, even if just for the meantime. An earlier deal in 2003 dissolved after tribal militants failed to hold up their end of the bargain. Few expect this deal to hold either. "This is just a temporary solution," says ABC News Consultant Rahimullah Yusufzai. "They want to push things under the carpet for the time being." Witnesses in North Waziristan said tribal leaders hugged each other and fired guns to celebrate the deal, which is widely being viewed as a victory for their camp and a humiliating retreat for the Pakistan military. Under the agreement, the Pakistan military will stop monitoring the activity of the militants, who will pledge to "live like good citizens," General Sultan said. More than 30 militant prisoners have been released, and the military will pay compensation for property destroyed during the fighting. Analysts here are concerned the militants will step up cross border activity and see no reason they will put an end to attacks on this side of the border either. "Is this the birth of Talibanistan?" asked an Islamabad diplomat.