Islamabad - Thousands of people on Wednesday held a peace rally in Pakistan's militancy-plagued Swat valley, two days after a radical cleric signed a controversial deal with the government to end violence in the region, locals and police said.

"More than 15,000 people joined our peace march," said Amir Izzat, the spokesman of cleric Maulana Sufi Mohammad, who led the rally. A local police official put the numbers at around 10,000.

The marchers, carrying black and white flags, paraded through Mingora, the main town in Swat, where jubilant crowds lined the streets to greet them.

"The objective of the peace rally is to end fear and terror in the area so that people could return to their normal lives," Izzat added.

Swat, formerly a popular tourist destination, has been in the grip of violence since late 2007 when Mohammad's son in law, Maulana Fazlullah, launched an armed campaign for the enforcement of Islamic sharia law in the region.

Around 14 months of fighting between pro-Taliban militants and security forces left hundreds of people dead, caused a mass exodus to the safer areas and destroyed the once-flourishing tourism industry in Swat.

On Monday, the regional government in North Western Frontier Province and Mohammad, who heads a banned group called Tehrik-e-Nifaaz Shariat Muhammadi, signed an agreement to end the conflict.

Under the controversial deal, the authorities will establish Islamic courts to meet a longstanding demand of the militants.

Following the Mingora rally, Mohammad traveled to the nearby Matta area, a militant stronghold in Swat, to convince Fazlullah to end his armed campaign. Fazlullah has welcomed the peace accord by announcing a 10-day cease-fire.

NATO and Britain have expressed concern about the agreement. NATO spokesman James Appathurai said Tuesday in Brussels: "We should all be concerned by a situation in which extremists would have a safe haven."

The British High Commission in Islamabad said in a statement that similar peace deals have failed to resolve Swat's problems.

The United States, however, reacted cautiously. "As I understand it, Islamic law is within the constitutional framework of Pakistan," State Department spokesperson Gordon Duguid told reporters.

"So I don't know that that is particularly an issue for anyone outside of Pakistan to discuss, certainly not from this podium," he added. (dpa)