Azerbaijani President Ilham Aliyev said on Tuesday that a peace deal with Armenia was closer than ever before, as teams from the two countries headed to the border to start demarcation work, hoping to end decades of territorial disputes.

Aliyev's optimism over a potential agreement between the arch-foes comes after a flurry of progress towards border delimitation that has sparked protests in Armenia, still bruised after Baku seized control of Nagorno-Karabakh in a lightning offensive last autumn.

On Tuesday teams from both countries began physical inspections of a border section that the two sides had agreed to mark based on Soviet-era maps.

"We are close as never before," Aliyev said on Tuesday of an elusive peace deal.

"We now have a common understanding of how the peace agreement should look like. We only need to address details," he said during a televised meeting with political analysts in Baku.

"Both sides need time... We both have the political will to do it."

Armenian Prime Minister Nikol Pashinyan last month agreed to Baku's demand to return four border villages that were part of Azerbaijan when the two countries were republics of the Soviet Union. 

 Armenian protests 

 Aliyev said on Tuesday he had accepted a proposal by Kazakhstan to host a meeting of the two countries' foreign ministers.

Several countries have tried to mediate between the historic rivals -- including Russia, Iran, the United States, France and Germany. But years of talks have failed to produce a breakthrough.

Aliyev downplayed the need for third-party oversight.

"We are not talking about any kind of mediation, because what happens now on our border demonstrates that when we are left alone... we can agree sooner than later," he said.

The interior ministries of both countries said on Tuesday experts had been dispatched to study the border terrain and clarify coordinates for demarcation.

Fresh rallies erupted in Armenia on the news, with protestors blocking traffic at several points on the Armenia-Georgia highway, fearful Yerevan would cede more land.

Armenia said on Tuesday it was ruling out "the transfer of any parts of Armenia's sovereign territory".

The four abandoned settlements that are to be returned to Azerbaijan -- Lower Askipara, Baghanis Ayrum, Kheirimly and Gizilhajili -– were taken over by Armenian forces in the 1990s, forcing their ethnic Azerbaijani residents to flee.

But Armenian residents of nearby villages fear they will end up isolated from the rest of the country and that some houses could fall into Azerbaijani territory.

The area has strategic importance for landlocked Armenia.

Several small sections of the highway to Georgia -- a vital trade artery -- could be handed over.

The delimited border will run close to a major Russian gas pipeline, in an area that also offers advantageous military positions. 

 'Sign of peace'-

 Pashinyan has insisted on the need to resolve the border dispute "to avoid a new war".

On Saturday, he said Russian border guards -- deployed in the area since 1992 -- would be replaced.

"Russian border guards will withdraw from the area and border guards of Armenia and Azerbaijan will cooperate to guard the state border on their own," he said.

He said border delimitation was a "significant change" that would mean the two countries "now have a border and not a line of contact, which is a sign of peace."

Last autumn, Azerbaijani troops recaptured the breakaway Nagorno-Karabakh region from Armenian separatists in a lightning offensive that effectively ended a bloody three-decade standoff over control of the region.

But lingering territorial claims have continued to threaten a fresh escalation.

Baku has claims over four more villages located in exclaves deeper in Armenian territory.

It is also demanding the creation of a land corridor through Armenia to connect the mainland to the Nakhichevan exclave and onwards to close ally Turkey.

Yerevan, in turn, points to its exclave in Azerbaijan and pockets of land Baku has seized over the last three years outside of Karabakh.