Lyft Inc will launch ride-sharing operations on Friday evening in New York City after reaching an agreement with New York authorities over the company's compliance with state licensing and insurance regulations.

The agreement with New York Attorney General Eric Schneiderman and the state's top insurance regulator, Benjamin Lawsky, also calls for Lyft to suspend its current operations in Buffalo and Rochester by Aug. 1, while the company continues to work with authorities on ensuring that its model complies with the law.

Lyft allows people to use a smartphone to request a ride within minutes from a "background-checked driver," who is paid with a stored credit card when the ride ends, according to its website. For payment, Lyft collects suggested donations in some cities and a set amount in others.

The company offers drivers an insurance plan and operates in more than 30 states, according to its website.

The deal comes one week after Schneiderman and Lawsky asked a state judge to block Lyft's planned New York City launch just hours before it was set to start, claiming the company had ignored state law.

Under the agreement, Lyft drivers will be licensed by the city's Taxi and Limousine Commission (TLC) to provide for-hire service.

Rides will begin at 7 p.m., the company said in a blog post. It was not immediately clear how many drivers would be involved.

"This agreement is the first big step in finding a home for Lyft's peer-to-peer model in New York," the blog post said. "Community-powered transportation - neighbors driving neighbors in their personal cars - ensures broader access to more affordable rides in places with limited transit options, like the outer boroughs of Brooklyn and Queens."

In a statement, Scheniderman said the agreement is "proof positive" that regulators and companies can work together to allow new ideas to come to market.

Lyft's competitors include Sidecar, which also links passengers with drivers who use their personal vehicles; and Uber, Flywheel and Hailo, which connect passengers and taxis. Many have clashed with various state and city regulators.

Uber already operates in New York City and uses TLC-licensed drivers.

"We are pleased to welcome Lyft as a fully-licensed for-hire service in New York City, and appreciate their having fulfilled their commitment to the TLC and to the court to act within the law," said TLC Chairwoman Meera Joshi. 

(Reporting by Joseph Ax; Editing by Nick Zieminski, Bernard Orr)