General Dostum's militia - lined up against Atta Mohammad's fighters
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The Afghan Government has helped broker an end to some of the worst factional violence since the Taleban fell two years ago.
More than 60 fighters were reported killed or wounded in battles in the north between followers of warlords Abdul Rashid Dostum and Atta Mohammad.
Both sides say they have now agreed a ceasefire after talks called by Interior Minister Ali Ahmad Jalali.
Observers say it is unclear if the deal will last. Both warlords nominally support President Karzai.
'Immediate ceasefire'
Correspondents say the clashes throw further uncertainty on Mr Karzai's plans to disarm the warlords.
There is no confirmation of the exact number of casualties from the fighting.
The two sides say they have started to withdraw their tanks and other weaponry from the battlefield following Thursday's talks.
"In this meeting we agreed to a ceasefire with immediate effect
which will apply to all of the north," Atta Mohammad told reporters.
General Dostum's deputy, Said Nurullah, confirmed the ceasefire but said the situation was still tense.
He said both sides had agreed to withdraw troops to their previous positions.
The heaviest fighting, which broke out on Wednesday, was 60 kilometres (37.5 miles) west of the city of Mazar-e-Sharif.
There were reports of clashes elsewhere in the region.
A foreign ministry spokesman called the clashes the "worst we've seen in months".
Three hundred Afghan police are due to travel from the capital, Kabul, to ensure security in the city.
Serious doubts
General Dostum and Mohammad Atta are long-term rivals for control of northern Afghanistan.
Both men are nominally supporters of President Hamid Karzai. General Dostum is deputy defence minister.
The fighting further illustrates the problems facing President Karzai in imposing order beyond the capital, Kabul.
The government is committed to a plan to disarm the country's warlords.
But correspondents say there are serious doubts as to whether the new national army and police force will be strong enough to impose order throughout the country.
Atta Mohammad is head of the mainly Tajik Jamiat-i-Islami militia.
General Dostum leads Afghanistan's minority Uzbek community.
Correspondents say he is a controversial figure who has often changed sides in Afghanistan's complex web of shifting alliances.
In south-eastern Afghanistan there are increasing security problems caused by the resurgence of the Taleban which was deposed by US-led forces in Operation Enduring Freedom that began two years ago.
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These battles are the worst we've seen in months
