The African Union says north and south Sudan have agreed to demilitarize the disputed Abyei region and to allow an Ethiopian peacekeeping force in the area.

The north occupied oil-rich Abyei last month, one of several developments that have raised fears of war in Sudan as the south gets set to declare independence in July.

AU spokesman Barney Afako said Monday's agreement was reached after two days with AU mediators in Ethiopia's capital, Addis Ababa.

He indicated the sides are still negotiating over the administration of Abyei.

Earlier, U.S. Secretary of State Hillary Clinton said the U.S. wants northern troops to leave Abyei, and would welcome Ethiopian peacekeepers being sent in.

South Sudan voted to split from the north in a January referendum. The sides previously fought a 21-year civil war that ended in 2005.

Observers have raised concern about renewed conflict because of the Abyei issue and fighting in another border area, Southern Kordofan state. Northern troops have been fighting southern-aligned armed groups in Southern Kordofan for more than a week.

The United Nations says more than 50,000 people have been displaced from the area.