Kurdish leader Massoud Barzani said Friday that he and President Saddam Hussein's government have agreed to key points in a peace proposal but declined to disclose them.

Barzani, whose Kurdish Democratic Party is the largest guerrilla faction in the coalition against Saddam, has been discussing Kurdish autonomy and democratic reform with the government for two weeks.The rebel leader told reporters he would provide details of the proposal at a news conference Saturday. However, he indicated that the Kurds have dropped their demand for international guarantees to any accord with Saddam's government, and urged refugees to return to northern Iraq.

Tens of thousands of Kurds fled to the mountains to escape government retribution after their failed uprising in the wake of the Persian Gulf war.

Meanwhile, allied officials said Friday they intend to build several more camps near Zakho in northern Iraq to house up to 100,000 Kurds on their way home.

Coalition forces ran out of tents earlier this week, but have found 35,000 tents at various locations worldwide, the Operation Provide Comfort task force said. The tents will be sent to Zakho.

Barzani, who held an impromptu news conference at a Baghdad hotel, was asked if an agreement would be signed soon. "I'm optimistic," he replied.

Democratic reform, including wider participation of the Kurds in the legislative and executive decisions, has been one of the rebels' key demands.

They also want full autonomy in three northern provinces where most of the 3.5 million Kurds live, and a share of the revenue from lucrative oil fields located in the Kurdish region.

"We didn't reach full agreement, but we passed a very important step," Barzani said. "We agreed with the government about the main points of the democracy."

Asked whether the Kurdish people could trust Saddam, who they claim abrogated an agreement on autonomy in the 1970s, Barzani said, "Why not?"