(AFP) - Michelle O'Neill on Saturday became the first nationalist leader of Northern Ireland's government, a historic moment for the British territory prompted by the return of power-sharing after the biggest pro-UK party ended a two-year boycott.

In a special sitting, the Northern Ireland Assembly first voted to resume devolved governing and then nominated the pro-Irish unity Sinn Fein politician as first minister.

The landmark move came after the Democratic Unionist Party (DUP) ended its walkout from the Stormont institutions after striking a deal this week with the UK government over post-Brexit trade rules.

The assembly also appointed the DUP's Emma Little-Pengelly to be O'Neill's deputy and filled other top ministerial posts.

Under the 1998 Good Friday Agreement, also known as the Belfast Agreement, that ended three decades of sectarian violence over British rule in Northern Ireland, the first minister and deputy first minister posts are equal.

But the appointment of a Roman Catholic, pro-Irish unity first minister in a nation set up as a Protestant-majority state under British rule is hugely symbolic.

It not only reflects Sinn Fein's position as Northern Ireland's biggest party but also shifting demographics, since the island of Ireland was split into two self-governing entities in 1921.

- 'A day of optimism' -

"This is an historic day and it does represent a new dawn," O'Neill told fellow lawmakers shortly after her selection, noting it was "unimaginable to my parents' and grandparents' generation".

"We must never forget all those who have died or been injured or their families," she said.

"I am sorry for all the lives lost during the conflict without exception," she said, adding: "I am wholeheartedly committed to continue in the work of reconciliation between all of our people."

US President Joe Biden welcomed the development as "an important step".

"I look forward to seeing the renewed stability of a power-sharing government that strengthens the peace dividend, restores public services, and continues building on the immense progress of the last decades," he said in a statement.

O'Neill takes office facing the pressing problem of fixing budgetary constraints and crumbling public services that have sparked widespread industrial disputes in Northern Ireland.

She has called the assembly's restoration "a day of optimism" and urged a joint effort to tackle the problems.

The 47-year-old has been first minister-designate since May 2022, when Sinn Fein became the largest party in elections for the 90-seat assembly.

But until now, the DUP boycott of the assembly had prevented her from taking up the role.

Northern Ireland shares the UK's only land border with the European Union, with the Republic of Ireland to the south. Under the 1998 peace accord it needs to be kept open, without infrastructure.

London struck a separate Brexit trade pact with Brussels over Northern Ireland, which mandated port checks on goods arriving there from mainland Britain -- England, Scotland and Wales.

Unionists, though, said that effectively keeping only Northern Ireland in the EU single market and customs union risked cutting it adrift from the rest of the UK, and made a united Ireland more likely.

- 'Sustainable' -

But after two years of protracted negotiations, the DUP has returned to power-sharing.

The deal it struck with London this week will ease routine checks on goods crossing the Irish Sea destined to remain in Northern Ireland.

The UK government will release a £3.3 billion ($4.2 billion) package to bolster struggling public services there, after a series of strikes in recent weeks over pay.

"Today is a good day for Northern Ireland, a day when once again our place in the United Kingdom and its internal market is respected and protected," DUP leader Jeffrey Donaldson said at Stormont.

Chris Heaton-Harris, Northern Ireland Secretary in the UK government, said he was "confident" it would now have "sustainable government... for a very long time".

However, smaller, more hardline unionists remain bitterly opposed to Stormont's return.

© Agence France-Presse