The Progressive Unionist Party is to retain its association with the UVF and Red Hand Commando, while working to build stability in loyalist communities and to bring about "conflict transformation".
The party was reported to have been considering ending its relationship with loyalist paramilitaries in advance of the annual conference at the weekend.
Instead, it said it would form a partnership with those working to "sort out" the difficulties following the feud between the UVF and the LVF, and serious rioting in loyalist areas last month.
A statement released on Saturday after the conference in Belfast, which was held behind closed doors, said: "This requires transformation in the communities most affected by conflict and, importantly, transformation in the political arena and in particular amongst those powerful influences that seek to destabilise loyalism - the same influences that opposed the calling of the ceasefires in 1994."
Party leader David Ervine said: "Do we want them to sort it out? Answer, yes. Do we want to give them time and space to sort it out? The PUP is saying yes, give them space and let's get it sorted out."
He was speaking in advance of remarks n Bodenstown, Co Kildare, yesterday by the Taoiseach, who pledged that those loyalists "seeking genuine efforts at transformation will see a positive and open response from my Government".
Mr Ahern said: "It will be a response that will not diminish my commitment to a united Ireland, no more than it will make loyalists any less unionist, but a response that seeks to live out the true spirit of Wolfe Tone in the republican ideals of liberty of conscience, equality of opportunity and fraternity of relationships."
The PUP statement was criticised by the SDLP, which has been pressing the small party to end its links with loyalist paramilitaries, accusing it of facing both ways on loyalist paramilitarism.
North Belfast Assembly member Alban Maginness said an opportunity had been lost.
He accused the party statement of containing "stunning blandness" about commitment to transforming communities.
"There are people committed to transforming loyalist communities into a drug-ridden wasteland, and others committed to creating a free-fire zone around Orange marches.
"Politics is about leadership," he said. "The PUP must learn this and learn to give leadership."