Other media reports also said Davis was immediately flown to London. The US Embassy had no immediate comment.

According to the deal, family members of the slain men would be granted US visas and given blood money.

Punjab Law Minister Rana Sanaullah told Arab News, “Family members of the slain men were under threat and so they sought visas to live in the United States.”

The deal, reached just hours after the contractor had been indicted by a court, ends a long-simmering diplomatic standoff between Pakistan and the United States.

“The court first indicted him but the families later told the court that they have accepted the blood money and they have pardoned him,” Reuters quoted Rana Sanaullah as saying.

Davis, 36, shot dead two Pakistanis Fahim and Faizan after what he described as an attempted armed robbery. He said he acted in self-defense and the United States said he had diplomatic immunity and should have been immediately repatriated.

The case became a major test of ties between the United States and Pakistan, a vital ally in the US-led campaign against Taleban militants in Afghanistan.

After Davis' acquittal, the case could become even more contentious in Pakistan. The country's religious parties had tried to block such a deal, calling for Davis to be hanged, and the families' lawyer suggested they had been forced to sign the papers.

“We were put in detention for four hours and not allowed to meet our clients who were called by authorities to the court,” Asad Manzoor Butt, a lawyer for family of one of the slain men told Reuters.

According to a report Punjab Chief Minister Shahbaz Sharif and his brother former Prime Minister Nawaz Sharif had left for London two days back in anticipation of a popular backlash over Davis’ imminent release.

There had been speculation that a deal was in the works between the United States and the families of the dead men, including a third killed when a US Consulate vehicle struck him while en route to extract Davis from the scene.

Payments of blood money are sanctioned by Shariah and are common in some parts of rural Pakistan as a way to settle disputes.

Questions swirled around the identity of the victims from the beginning, with some media reports saying the men worked for Pakistan's Inter-Services Intelligence (ISI) agency, and that they might have been known to Davis.

Other reports suggest they were armed robbers who had already targeted others in Lahore before attempting to rob Davis, tailing him on motorbikes along a congested city road.

The case also strained ties between the CIA and Pakistan’s ISI agency, which said it was unaware Davis was working in Pakistan.