Northern Ireland Assembly members have been given until 24 November to set up a power-sharing executive.
Tony Blair and Bertie Ahern travelled to Northern Ireland to unveil their blueprint for restoring devolution.
They confirmed the assembly will be recalled on 15 May with parties being given six weeks to elect an executive.
If that fails, the 108 members get a further 12 weeks to try to form a multi-party devolved government. If that attempt fails, salaries will stop.
The British and Irish governments would then work on partnership arrangements to implement the Good Friday Agreement.
Mr Ahern has acknowledged the difficulties facing himself and Mr Blair were compounded by the murder of ex-Sinn Fein official and former British spy Denis Donaldson in County Donegal.
Despite denials of involvement in Tuesday's murder, the Democratic Unionist Party is blaming the IRA and that has pushed the prospect of power-sharing even further away.
Assembly recalled on 15 May: politicians given six weeks to form executive
If this fails, further 12 weeks after summer recess to form executive
If this is not achieved by 24 November deadline, assembly members' salaries and allowances stopped
Governments would then work on partnership arrangements to implement the Good Friday Agreement
Speaking from Navan Fort in County Armagh on Thursday, Mr Blair said it was "a moment to let the process be governed, not by suspicion but by the faith that the other does want this to succeed."
"We have today set out a framework beginning with the recall of the assembly on the 15th of May and running up to November of this year for that ultimate decision to be made," he said.
"At that point we close the chapter... or we close the book."
Mr Ahern said the politicians have been given a "finite" time to reach agreement.
"It is time to talk and to agree, people are entitled to firm assurances that if there is deadlock that it will not be allowed to continue indefinitely," he said.
The Stormont government has been suspended since October 2002
Sinn Fein leader Gerry Adams said there were "negatives and positives" in the statement.
"We welcome that the assembly has been brought together... we have concerns about the timeframe, about other aspects of the statement, but we think that's a good forward step.
"We would like to think that unionism generally would see it as a positive opportunity."
DUP leader Ian Paisley said: "Currently there is no evidence that Sinn Fein/IRA will be any further advanced in giving up criminality in November.
"Given the reality that there will be no executive formed for the foreseeable future the best way forward is to get working in the assembly."
Ulster Unionist leader Sir Reg Empey said he welcomed the recall of the assembly.
"We urgently need to have an input into, and make changes to, direct rule decisions on education, water rates and the Review of Public Administration to name but three. This is our job."
He said the statement provided opportunities and threats, adding it was time to seize the opportunities and minimise the threats.
Devolved government at Stormont was suspended in October 2002 following allegations of a republican spy ring.
Mr Donaldson was one of three men later acquitted of charges linked to those allegations.