The violence began when gunmen attacked convoys of civilian vehicles on Thursday, killing at least 40 people, mostly Shi'ite Muslims. That sparked retaliatory attacks against Sunni Muslim residents and there have been pitched battles between armed groups from both sides.
Armed Shi'ite and Sunni Muslims have engaged in tribal and sectarian rivalry for decades over a land dispute in Kurram district near the Afghanistan border.
"Both sides have agreed to a week-long ceasefire which is expected to be extended," Muhammad Ali Saif, a member of the mediation team, told Reuters by phone on Sunday, adding that major clashes had already stopped.
Saif, who is also the information minister of Khyber Pakhtunkhwa province, where Kurram is located, said both sides had also agreed to exchange prisoners, including women, and the bodies of those killed in the clashes.
The prisoners and bodies will be exchanged with assistance from Pakistani paramilitary forces.
The team flew into Parachinar, Kurram's main city, on Saturday and met Shi'ite and Sunni tribal leaders with the entire district under virtual curfew and armed groups roaming the streets in many villages.
Saif said news of the ceasefire should also halt smaller skirmishes that had been reported in remote areas of the district.
Another member of the mediation team, Akhtar Hayat Gandapur, the police chief of Khyber Pakhtunkhwa, said Shi'ite leaders were demanding the immediate arrest of those involved in attacking passenger vehicles, as well as compensation for the victims and safety assurances for travellers.
The government is yet to identify or publicly name who the attackers were and no one has claimed responsibility.
Two government sources, who asked to remain anonymous due to the sensitivity of the matter, said the death toll from retaliatory violence since Thursday's bus attacks had risen to at least 28, putting the overall toll at 68.
Armed groups stormed into settlements inhabited by members of rival sects. Many homes have been evacuated, while markets and schools remain closed and several petrol stations were set alight, the officials said.
They said they feared the death toll could rise as communications in the area are down, making information difficult to obtain.
