A joint statement, issued following two days of talks, said that the US 2nd Infantry Division, stationed close to the border, would be moved south of the Han River, which bisects the South Korean capital Seoul.

The US has been considering changing its troop deployments in South Korea for some time. At present nearly half the 37,000 US troops in South Korea are stationed north of Seoul, a throwback to the 1950-53 Korean war.

But their forward position puts them in range of North Korean artillery, and US officials have said that pulling troops back would strengthen the military's hand.

The statement gave no timetable for the withdrawal, but said it would take place in two phases.

The proposed withdrawal has caused unease in South Korea because of the signals it could send the unpredictable North, which is locked in a tense stand-off with the US over its alleged nuclear ambitions.

US officials reiterated remarks made by Deputy Defense Secretary Paul Wolfowitz on Monday that changes to the frontline 2nd Infantry Division would enhance military readiness, not diminish it, the statement said.

Even after the move, US troops would continue to train north of Seoul and close to the Demilitarized Zone separating the two Koreas, the statement added.

The redeployment will free up more money to improve the military infrastructure, and enable Washington to hand land back to South Korea, the US Forces in South Korea has said.

To this end, the main US army headquarters will also be moved from its current location in prime real estate in central Seoul "at an early date", Thursday's statement said.

Last week the US military said it would spend an additional $11bn over the next three years to strengthen its forces in South Korea.