Move comes after deal signed with the FARC rebel group - a pact that was narrowly rejected by voters in a referendum.
Colombian President, and freshly-crowned Nobel Peace Prize laureate, Juan Manuel Santos and the National Liberation Army (ELN) rebel group are to start peace talks, officials have said.
The negotiations with the 2,000-strong National Liberation Army (ELN) will start on October 27 in Ecuador's capital Quito, according to an agreement signed in Caracas by both sides under the auspices of Venezuela's government.
"We are a special nation that grows despite adversities," Santos said in a speech after the announcement.
"Peace won't slip through our fingers. On the contrary, it will be stronger, and now that we will advance with the ELN, it will be complete."
READ MORE: President Santos bids to save peace deal
Santos won the Nobel Peace Prize last week for his efforts to end a 52-year-old war with the leftist Revolutionary Armed Forces of Colombia (FARC) - a surprising choice given voters then narrowly rejected the deal in a referendum.
Al Jazeera's Alessandro Rampietti, reporting from Bogota, said the peace talk is expected to open doors to the possibility of complete peace in Colombia.
"Many analysts here think that this announcement also boosts Santos' chances at reaching a deal with the opposition in Colombia since a narrow majority of Colombians voted against the current peace accord with the bigger rebel group, the FARC," our correspondent said.
"Santos with the oppositions is looking at the changes to that accord to save the peace and there is no doubt that this announcement could help this process."
Colombia and the ELN agreed in March to launch peace talks, in parallel with the government's negotiations with the FARC, but the government said negotiations with the ELN could not begin until the group freed all of its hostages.
In the text presented in Caracas, the ELN vowed to "initiate the process to free hostages before October 27".
The Red Cross said ELN fighters had handed over the latest hostage, who it did not identify, in a remote area in Arauca, on the Venezuelan border.
Catholic Church sources identified the hostage as Nelson Alarcon, kidnapped three months ago.
The conflict in Colombia has killed more than 260,000 people, left 45,000 missing and uprooted nearly seven million. Over the decades, it has drawn in several leftist rebel groups, right-wing paramilitaries and drug gangs.
The last two leftist guerrilla groups, the FARC and ELN, have been at war with the state since 1964. The ELN is estimated to be about one fourth the size of the FARC, with about 1,500 fighters.
Santos's Nobel prize was seen as a boost for the process, as the government negotiates with both the opposition and the FARC to salvage the deal.
Meanwhile, FARC leader Timoleon "Timochenko" Jimenez tweeted that the ELN could "count on our militant support and solidarity. Many successes in this process that has now started".
Formal peace talks with the ELN would mark another victory for Santos, who has staked his legacy on ending the oldest armed conflict in the Americas.
The ELN has sought peace before, holding talks in Cuba and Venezuela between 2002 and 2007