North Korea's foreign ministry said Monday that the United States has decided to remove the communist state from the list of states sponsoring terrorism.
If confirmed, the move would represent the biggest step towards peace on the divided peninsular since the Korean War armistice in 1953.
North Korea has been on Washington's terrorism list since 1987, when one of its agents admitted placing a bomb on a South Korean airliner that exploded with a huge loss of life over Burma the same year.
The U.S. decision followed a meeting between the chief nuclear negotiators of the two countries in Geneva at the weekend, said a foreign ministry statement carried by the North's official Korean Central News Agency (KCNA).
"In return for this the US decided to take such political and economic measures in compensation as delisting [North Korea] as a terrorism sponsor and lifting all sanctions that have been applied according to the Trading with the Enemy Act," said the statement.
Nancy Beck, a spokeswoman of the U.S. State Department in Washington said she did not have confirmation of the KCNA report.
A foreign ministry spokesman said the latest talks with the US had "laid the groundwork for making progress at the plenary session of the six-party talks" aimed at ending the communist state's nuclear ambitions.
North Korea has already shut down a key nuclear reactor at Yongbyon under a denuclearization-for-assistance pact reached upon at a six-party talks in February. The nuclear talks involve the two Koreas, the United States, China, Japan and Russia.
Under the deal, North Korea agreed to make a full declaration of all its nuclear programmes and to disable them in return for aid and security and diplomatic guarantees, notably normalising ties with the United tates.
The six-party talks are expected to resume in Beijing later this month.
The scheduled summit between President Roh Moo-hyun and North Korean leader Kim Jong-il is also expected to give a momentum to the North's denuclearization process.