The deal hammered out at the weekend by the Prime Minister, Julia Gillard, and the Tasmanian Premier, Lara Giddings, has the full backing of industry but was criticised by green groups.

It puts into effect principles already agreed by these two sides to shift the ailing industry out of most high-profile native forests, protect many such forests in national parks and compensate those firms forced to leave.

Tasmania's forests debate has been a defining national green issue since the 1980s, marked by repeated attempts at a federal settlement that only brought temporary truces.

''At times that conflict has been very bitter indeed,'' Ms Gillard said.

The deal would ensure complete agreement could be reached, she said.

Changing commercial conditions, chiefly the rejection of native forest woodchips by Japanese markets, drove the industry and green groups into negotiations.

The package confirms the reservation of 430,000 hectares of native forest around the state.

Among areas protected will be the hotly disputed very tall forests fringing the World Heritage wilderness, the Tarkine rainforests of the island's north-west and a sprinkling of mountainous coastal forests around the east coast.

''People do want to see appropriate protection for ancient and iconic forests, for areas of high conservation value, and the agreement that has been struck … does enable us to do it,'' Ms Gillard said.

With the lion's share of funds to come from the Commonwealth, the package's big-ticket items are $85 million to workers and contractors who lose their jobs in industry restructuring, $120 million in extra regional development money for Tasmania and $43 million to implement the changes.

The deal ensures existing major logging contracts can be met from forests outside the protected areas but halves the key sawlog quota.

The strategically important Triabunna woodchip mill, bought by wealthy environmentalists Jan Cameron and Graeme Wood last week, is to keep operating. But its chips will need Forest Stewardship Council certification, meaning an end for the mass woodchipping of old growth that so divided Tasmania.

Ms Giddings called for an end to environmental protests that targeted the industry, saying the agreement marked an end to debate over logging in old-growth forests. ''It is clear that against the tide of changing market conditions, doing nothing is not an option,'' she said.

The Forest Industries Association of Tasmania said the deal delivered security.

''We do fully support the agreement,'' the association's chief executive, Terry Edwards, said.

Green groups said they backed the government's decision to reach an important decision.

But one of the chief negotiators, Phill Pullinger of Environment Tasmania, said critical points still lay ahead in translating the weekend's federal-state heads of agreement into a fully operational process.

The Tasmanian Greens, who hold the balance of power, reserved the right not to support some elements of the agreement, which may need legislating through the Parliament.

The federal Greens leader, Bob Brown, said the agreement was a ''Labor-Labor-loggers'' outcome.

''The popular expectation that a 610,000 hectare system of wild forest national parks would be established, as the loggers were bailed out of their failing industry, has been dashed,'' Senator Brown said.

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