Colombia announced a deal Wednesday to hold peace talks with its last active rebel group, the ELN.

The move aims to seal "complete peace" after the signing of a historic deal with the bigger FARC guerrilla force, President Juan Manuel Santos said.

"I can tell you we have come to an agreement" on launching talks, having settled a dispute about the release of a hostage that National Liberation Army (ELN) rebels were holding, Santos said at the World Economic Forum in Davos, Switzerland.

Delegations from the two sides meeting in Ecuador said later they had agreed that the ELN would release the hostage and the government would in return grant pardons to two members of the rebel group.

The talks will then start on February 7, they said.

"We have been trying to start these official negotiations for three years now and the truth is it has been a very difficult process," Santos said.

"This second stage that is going to begin next month is extremely important because it will allow us to achieve a complete peace, not only with the FARC but with the ELN, too."

- Sealing the peace -

Santos has already signed a historic peace accord with the country's biggest rebel group, the leftist Revolutionary Armed Forces of Colombia (FARC).

That deal is seen as effectively ending Latin America's last major armed conflict.

It will demobilize and disarm the 5,700-strong FARC and transform them into a political party.

To completely seal the peace, Colombia wants to include the leftist ELN, estimated to have about 1,500 members.

Negotiations had stalled in October due to disagreement over the release of the hostage, an ex-lawmaker.

- FARC renegades -

The FARC meanwhile on Wednesday reported bloodshed involving a breakaway faction of fighters from its ranks led by a commander opposed to the force's peace deal with Santos.

Commanders of the FARC's Southern Bloc said in a statement the violence erupted on January 10 near the southern central town of San Vicente del Caguan.

"There was an armed confrontation between units of this bloc and a squad led by Alexander Mojoso, who resolved to abandon our ranks on the grounds that he disagrees with the current peace agreement," it said.

"In the clash, one member of Mojoso's group is said to have been killed."

The FARC is due to start disarming in the coming weeks under UN supervision.

The Colombian conflict grew out of a crushed peasant uprising in the 1960s. It has killed more than 260,000 people and left 60,000 missing.

The conflict has drawn in not only the Colombian armed forces, the FARC and the ELN, but drug gangs, right-wing paramilitaries, and other leftist rebel groups that have since disbanded.

- Risk to peace -

In October, voters taking part in a referendum rejected a peace deal with the FARC after opponents condemned what they said were concessions made to the rebels.

The deal allows the FARC to transform into a political party.

The opposition campaign complained that Santos granted the rebels seats in Congress, saying he should have jailed them for war crimes.

Santos won the Nobel Peace Prize five days after the referendum defeat.

He and the FARC revised the peace deal and had it ratified in Congress, rather than in another referendum.

Apart from Santos' political rivals, there are concerns over sectors of the FARC opposed to the peace accord.

Mojoso "is working to unite rural people, to discredit the peace process and to oblige them through threats to support him unconditionally," the FARC statement said.

Santos has warned that delaying implementation of the accord raises the risk that fresh violence will break out.