Kenyans sighed with relief on Thursday as two months of wrangling over disputed presidential polls finally produced a power-sharing deal to end a crisis that killed more than 1,000 people.

With loud music blaring from his brightly painted bus, driver Eric Keter said he was overjoyed - despite being stuck in one of the capital's infamous traffic jams. "Finally things can now go back to the way they used to be," the 27-year-old told Reuters. "I'm very happy I can now go back home without any worries because both sides have agreed."

Crowds of onlookers clapped and cheered as President Mwai Kibaki and opposition leader Raila Odinga signed a deal to resolve the crisis over the Dec. 27 vote, which damaged east Africa's biggest economy and made 300,000 people homeless.

"Now we have a government," said Teresa Mutito, a teacher in Kibaki's central Kenyan hometown of Othaya.

Standing outside a supermarket in central Nairobi, secretary Stella Chepkonga said the prayers of Kenyans had been answered.

"That's fantastic. I believe we will get the democracy we have been yearning for and I'm very happy and proud of our leaders," she said.

In Odinga's hometown of Kisumu, thousands poured onto the streets, dancing, singing and hooting car horns. Kisumu had been badly affected by violence that often took an ethnic edge and deepened divisions between Kenya's tribes.

"I am very happy because the tension has reduced and people are going to work together," said motorbike taxi driver Salim Akashe, part of a long procession of vehicles touring the town.

"Everyone is happy. I expect to work until very late and make more money because people will be celebrating all night."

Akashe said the creation of a prime minister's post for Odinga was a historic moment.

"We hope he will perform well in order to set a good example to the other prime ministers who will follow him."

Despite the jubilation, some Kenyans voiced concern.

"The president has talked very well, Raila talked very well, we have seen a lot of goodwill from this country," said Nairobi resident Daniel Kiprotich.

"But we are seeing some hardliners ... who are inside the police force who are just trying to destroy this celebration."

Thursday's deal also included a full review of Kenya's 45-year old constitution - a change that many in Kenya have sought since the early 1990s.

"It is brilliant that finally both sides have come to an agreement," said Nairobi accountant Peter Kamau.

"What is happening today should have happened six years ago but we are very happy. Long live Kenya!"