By Jeremy McDermott BBC correspondent in Colombia

Castano's presumed death has made talks more difficult

The announcement came as peace talks between the government and United Self-Defence Forces of Colombia (AUC) seemed about to unravel.

The talks have not been helped by the disappearance and presumed death of AUC founder Carlos Castano, apparently killed by rival paramilitaries.

The AUC is said to be one of the most brutal factions in Colombia's conflict.

The peace process between the government and the leaders of the 20,000-strong AUC have been tottering for some time.

In an effort to save the talks, the AUC commanders have agreed to stay in a zone in the north of the country under the observation of the Organization of American States.

The announcement does not comply with the government's demand that all paramilitary fighters move to concentration zones around the country and stop fighting.

But it seems to be an intermediary measure to keep the dialogue alive.

Any agreement with the AUC is deadlocked over two issues: crimes against humanity, which the paramilitaries want amnesty for along with all their other crimes, and extradition.