The deal was struck at a meeting between Indian Prime Minister Manmohan Singh and Chinese President Hu Jintao on the sidelines of the UN General Assembly session in New York late Wednesday, the Press Trust of India news agency said.

The two neighbours reiterated the need to seek a "reasonable solution" with "greater urgency," the report said quoting Indian foreign ministry spokesman Navtej Sarna.

India says China occupies 38,000 square kilometres (14,670 square miles) of Indian territory in Kashmir while Beijing claims that the 90,000-square-kilometre Indian-administered state of Arunachal Pradesh belongs to China.

A formal ceasefire line has yet to be established but the unsettled border has remained largely peaceful following agreements signed in 1993 and 1996.

In April, on a visit to New Delhi, Chinese premier Wen Jiabao and Singh agreed to a programme to solve the dispute without force.

The "three-tiered" border deal, described by India's National Security Adviser M.K. Narayanan as "one of the most significant documents" signed between the neighbours, will allow special envoys to negotiate territorial claims as experts delineate the boundary on a map and on the ground.

Narayanan, who is India's special envoy, is due to meet his Chinese counterpart Dai Binggao later this month.

Ties between the neighbours have been warming in recent years with an exchange of high-level visits and joint military exercises. Trade reached 13.6 billion dollars in 2004 and is targeted to hit 30 billion dollars by 2010.

Work is underway to reopen a section of the traditional Silk Route next month at Nathu La pass on the border between India's Sikkim and China's Tibet. It would be the first direct trade link since the 1962 border flareup.

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