The deal, which ends an eight-year impasse, offers new hope to the nearby overcrowded Marshalls island of Ebeye, referred to locally as the "slum of the Pacific".

It will extend the United States' use of the Reagan Test Site for an additional 50 years from 2016, and it hikes their annual rental for Kawjalein Atoll by about $4 million.

Kwajalein landowners will immediately receive a US$32 million pay-out from funds that have been accumulating since 2003 waiting for the agreement to be reached.

Thousands of Ebeye residents, filled the island's United Church of Christ and its grounds to witness the historic signing.

"Where we are at today is a compromise which we've agreed upon to safeguard our future," said Kwajalein landowner and senator Christopher Loeak.

The Marshall Islands cover nearly a million square miles of coral atolls, with more than 1,000 islets, just north of the Equator.

The islands were occupied by the US after World War II but became a sovereign nation under a Compact of Free Association with the US in 1986.

With the land use agreement settled, Marshall Islands Foreign Minister John Silk said "the real hard work can begin to develop Ebeye and the nation".

A US Army report last year said Ebeye's sewage, water and waste management infrastructure was either not working or on the verge of collapse, posing critical health threats to the population of 12,000.

"We have several key areas we want to address, particularly the road to Gugeegue, housing and sewer redevelopment," said Kwajalein senator and chief Michael Kabua.

About 1,000 islanders who work at the Kwajalein testing range live on Ebeye. gj/cf/ft

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