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Iraq's central government and leaders of the nation's semiautonomous Kurdish region unveiled an oil and budget deal Tuesday aimed at resolving a months-long dispute and presenting a united front against Islamic State militants.

The accord provides an interim resolution to a divisive issue at a time when the extremists threaten the central government in Baghdad and the Kurdish regional administration in the northern city of Irbil. The United States and other Iraqi allies have long pushed for an agreement to help improve often frosty relations between Baghdad and Irbil.

The deal calls for an Iraqi state entity to sell oil from Kurdish-controlled areas in the north while long-suspended federal revenues are restored to the Kurdish region. Both sides appeared to have compromised for now on the central issue: Who has the ultimate rights for the vast amounts of oil found beneath Kurdish lands?

Authorities said they hoped the accord would boost the nation's faltering economy.

"This deal is a win-win deal for both sides," Iraqi Finance Minister Hoshyar Zebari, a Kurd, told the Associated Press.

The disputed status of Iraq's oil revenues has stoked tension for more than a decade and recently threatened the government of Prime Minister Haider Abadi, a moderate backed by the United States and Iran, Iraq's major allies. Oil is Iraq's major source of revenue.

Abadi came to power in September, a few months after Islamic State insurgents swept through a large part of the country in June, chasing government forces and posing a grave security threat less than three years after U.S. troops left Iraq. The Pentagon has since launched airstrikes in Iraq and neighboring Syria against Islamic State, which President Obama has vowed to "degrade and ultimately destroy."

Though leading a Shiite-dominated government, Abadi has vowed to reach out to Iraq's disenchanted minorities, including Kurds and Sunni Muslims, as pro-government forces struggle to regain ground lost to the militants. Many experts saw Tuesday's agreement as a concrete marker of improved relations between Baghdad and the Kurdish region.

Brett McGurk, the U.S. deputy assistant secretary of State for Iraq, called the deal an "important breakthrough" in a Twitter post.

The United Nations envoy to Iraq, Nickolay Mladenov, hailed the two sides' "leadership and spirit of compromise in reaching this encouraging agreement."

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Iraq, Kurds agree on oil deal, uniting to fight Islamic State