The head of the decommissioning body, General John de Chastelain, published a report on Friday Feb 11 in which the IRA stated the context in which it would "put its weapons beyond use".
Mr Mandelson told the British-Irish Interparliamentary body meeting in London: "I do not for a moment underestimate the significance of this. If it means what it appears to mean, it may be the first sign that the IRA are, after all, prepared to give up their arms."
However, he said the statement was too unspecific and had come too late to avert the suspension of Northern Ireland's political institutions.
"But in the situation we faced on Friday, it was too unspecific and it came too late.", he said. "Had it come earlier, we could have sought, and possibly received, greater clarity. But, as it was, with the institutions on the point of collapse, I had no choice but to act as I did, as I said I would, under the review provisions of the (Good Friday) Agreement."
Mr Mandelson also confirmed that he and Irish Foreign Minister Brian Cowen will chair a forthcoming review of progress towards devolution. He suspended the institutions on Friday because of the impasse over paramilitary disarmament and is likely to face calls to reform the assembly, sooner rather than later, to avoid a dangerous political vacuum.
According to a spokesperson for Mr Blair, he said the second report by the General John de Chastelain, did clearly "take us forward". He would not have written it, he said, without thinking there had been real progress. He said the issue now remained a need for clarity on decommissioning.
Irish premier Bertie Ahern believes there has been a huge advance from the IRA on the arms issue. He said the IRA has, in effect, committed itself for the first time to decommissioning, after it told the body the context in which it would put weapons beyond use. Mr Ahern said this is "deeply significant" and stressed the need to move quickly and build on the IRA's commitment. He said suspension was damaging the Good Friday Agreement.
Former Sinn Fein education minister Martin McGuinness has accused Mr Mandelson of absolute lunacy for suspending the political institutions. Speaking on BBC Radio Ulster, Mr McGuinness said: "It's absolutely crazy and ludicrous that a British Government, which were party to the establishment of an independent, international committee on decommissioning, would now effectively tell Gen de Chastelain that he's wrong, tell him that the work he has done with the armed groups, including the IRA, is not acceptable and is almost akin to telling him that he should pack his bags and go."
However, Mr Trimble has warned that there should be no delay in carrying out a review. "If we don't get through this review quickly then we have a problem because it's only three months until May 22. That's that ultimate deadline with regards to the implementation of the agreement."
He said that Gen de Chastelain's integrity could be undermined by the "considerable media and political speculation" that the commission has more information from the IRA than is contained in the second report. "This clearly puts Gen de Chastelain and his commission in an invidious and possibly compromised position. His integrity could be undermined while such speculation continues. Since Gen de Chastelain might be inhibited from revealing the contents of private conversations, the onus falls upon the republican movement to come out publicly and reveal what promises it gave to the commission."