Washington has around 28,500 troops stationed in South Korea to defend it against the nuclear-armed North and protect US interests in north-east Asia.

But the security allies' relationship has been strained by the Trump administration's demands that the South pay billions of dollars more towards the cost of their presence after the previous funding pact expired last year.

Around 4,000 local civilian employees of US Forces Korea were put on unpaid leave in April after funds to pay their salaries ran out with talks stalled on cost-sharing.

A full new deal has yet to be struck, but Seoul offered more than $200 million to fund the cost of the civilian employees for the rest of the year, which the US Department of Defense accepted.

They will return to work "no later than mid-June", officials said.

South Korea's defence ministry welcomed Washington's decision to end the furloughs, saying the two sides will try to reach a cost-sharing agreement "at an early date".

The Trump administration initially insisted on $5 billion a year -- a more than fivefold increase.

South Korean media reports say it has dropped its demand to $1.3 billion per year, a near 50 percent increase from last year, while Seoul insists its best offer is a 13 percent rise.