YEREVAN, ARMENIA -- Armenia and Azerbaijan agreed Thursday to exchange prisoners of war and work toward signing a peace treaty in what the European Union hailed as a major step toward peace in the long-troubled region.

The two countries said in a joint statement they "share the view that there is a historical chance to achieve a long-awaited peace." They said they intend "to normalize relations and to reach the peace treaty on the basis of respect for the principles of sovereignty and territorial integrity."

Azerbaijan waged a lightning military campaign in September in the separatist region of Nagorno-Karabakh. The offensive ended three decades of rule there by ethnic Armenians and resulted in the vast majority of the 120,000 residents fleeing the region, which is internationally recognized as part of Azerbaijan.

Until Thursday's announcement, the two countries had bitterly argued on the outline of a peace process amid mutual distrust.

As part of the deal, Armenia agreed to lift its objections to Azerbaijan hosting next year's international conference on climate change.

Countries had been unable to agree on an eastern European host for the 2024 climate talks, with Russia vetoeing EU countries and Azerbaijan and Armenia nixing each other. A decision on the meeting's location and presidency is due within the next week.

The joint statement said that "the Republic of Armenia supports the bid of the Republic of Azerbaijan to host the 29th Session of the Conference of Parties (COP29) to the UN Framework Convention on Climate Change, by withdrawing its own candidacy."

European Council President Charles Michel praised the agreement as a major breakthrough, saying on X that he particularly welcomes the deal to release detainees and make an "unprecedented opening in political dialogue."

Michel called on Armenia and Azerbaijan to finalize a peace deal as soon as possible.

The U.S. government also welcomened the deal, saying the swapping of POWs was an "important confidence building measure as the sides work to finalize a peace agreement and normalize relations."

"The United States will continue to strongly support efforts to reach a durable and dignified peace," added the statement from State Department spokesman Matthew Miller.

Armenia and Azerbaijan said in their statement that talks between Azerbaijan's presidential administration and the office of Armenia's prime minister led to an agreement "on taking tangible steps towards building confidence between two countries."

Azerbaijan said it would release 32 captured Armenian military servicemen, while Armenia will release two Azerbaijani soldiers.

The two countries said they will continue their discussions "regarding the implementation of more confidence building measures" and called on the international community for support "that will contribute to building mutual trust between two countries."

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Associated Press writers Aida Sultanova in London and Seth Borenstein in Dubai contributed to this report.