The negotiations, taking place with the help of local tribal elders in the north-western district of Bajaur, could lead to talks in other areas, including the Swat valley where the government waged an offensive in 2009, if they are successful, Mohammad said.
Previous peace deals have broken down and have been criticised by the United States for allowing the rebels to regroup before launching new waves of attacks.
Faqir Mohammad is the former head of Taliban in Bajaur and has fought several times with Pakistani troops. He is regarded as close to Al-Qaida and his forces used to concentrate on attacks in Afghanistan until US drones started strikes in early 2006.
"There has been development in our peace talks but the government would have to show more flexibility in its stance and restore the trust of Taliban by releasing their prisoners and stop military operations against them," he told the Reuters news agency.
The government has released 145 Taliban as a gesture of good will and his forces have promised a ceasefire, he said.
The fresh report of peace talks comes after Pakistan's relations with the United States hit new lows on 26 November, when Nato air strikes killed 24 Pakistani soldiers in what the Pakistan military called a deliberate attack.