The new year, opening without hope, it began to be rumoured that O'Neil was disposed to surrender on honourable terms. Mountjoy and the English Council long urged the aged Queen to grant such terms, but without effect. Her pride as a sovereign had been too deeply wounded by the revolted Earl to allow her easily to forgive or forget his offences. Her advisers urged that Spain had followed her own course towards the Netherlands, in Ireland; that the war consumed three-fourths of her annual revenue, and had obliged her to keep up an Irish army of 20,000 men for several years past. At length she yielded her reluctant consent, and Mountjoy was authorized to treat with the arch-rebel upon honourable terms. The agents employed by the Lord Deputy in this negotiation were Sir William Godolphin and Sir Garrett Moore, of Mellifont, ancestor of the Marquis of Drogheda—the latter, a warm personal friend, though no partizan of O'Neil's. They found him in his retreat near Lough Neagh early in March, and obtained his promise to give the Deputy an early meeting at Mellifont. Elizabeth's serious illness, concealed from O'Neil, though well known to Mountjoy, hastened the negotiations. On the 27th of March he had intelligence of her decease at London on the 24th, but carefully concealed it till the 5th of April following. On the 31st of March, he received Tyrone's submission at Moore's residence, the ancient Cistercian Abbey, and not until a week later did O'Neil learn that he had made his peace with a dead sovereign.
The honourable terms on which this memorable religious war was concluded were these: O'Neil abjured all foreign allegiance, especially that of the King of Spain; renounced the title of O'Neil; agreed to give up his correspondence with the Spaniards, and to recall his son, Henry, who was a page at the Spanish Court, and to live in peace with the sons of John the Proud. Mountjoy granted him an amnesty for himself and his allies; agreed that he should be restored to his estates as he had held them before the war, and that the Catholics should have the free exercise of their religion. That the restoration of his ordinary chieftain rights, which did not conflict with the royal prerogative, was also included, we have the best possible evidence: Sir Henry Dowcra having complained to Lord Mountjoy that O'Neil quartered men on O'Cane, who had surrendered to himself, Mountjoy made answer—"My Lord of Tyrone is taken in with promise to be restored, as well to all his lands as to his honour and dignity, and O'Cane's country is his, and must be obedient to his commands." That the article concerning religion was understood by the Catholics to concede full freedom of worship, is evident from subsequent events. In Dublin, sixteen of the principal citizens suffered fine and imprisonment for refusing to comply with the act of uniformity; in Kilkenny the Catholics took possession of the Black Abbey, which had been converted into a lay fee; in Waterford they did the same by St. Patrick's Church, where a Dominican preacher was reported to have said, among other imprudent things, that "Jesabel was dead"—alluding to the late Queen. In Cork, Limerick, and Cashel, the cross was carried publicly in procession, the old Churches restored to their ancient rites, and enthusiastic proclamation made of the public restoration of religion. These events having obliged the Lord Deputy to make a progress through the towns and cities, he was met at Waterford by a vast procession, headed by religious in the habits of their order, who boldly declared to him "that the citizens of Waterford could not, in conscience, obey any prince that persecuted the Catholic religion." When such was the spirit of the town populations, we are not surprised to learn that, in the rural districts, almost exclusively Catholic, the people entered upon the use of many of their old Churches, and repaired several Abbeys—among the number, Buttevant, Kilcrea, and Timoleague in Cork; Quin Abbey in Clare; Kilconnell in Galway; Rosnariell in Mayo, and Multifarnham in West-Meath. So confident were they that the days of persecution were past, that King James prefaces his proclamation of July, 1605, with the statement—"Whereas we have been informed that our subjects in the kingdom of Ireland, since the death of our beloved sister, have been deceived by a false rumour, to wit, that we would allow them liberty of conscience," and so forth. How cruelly they were then undeceived belongs to the history of the next reign; here we need only remark that the Articles of Limerick were not more shamefully violated by the statute 6th and 7th, William III., than the Articles of Mellifont were violated by this Proclamation of the third year of James I.