City transit workers ended the three-day strike...

City transit workers ended the three-day strike that had crippled the nation’s largest public transportation system after union executives voted Thursday to return to work and resume contract negotiations.

Under a painstakingly negotiated cease-fire, New York bus and subway service will resume this morning for 7 million daily riders. The strike, which was illegal under state law, disrupted daily commuting, cut school attendance by about 50% and cost New York $700 million in lost business, Mayor Michael R. Bloomberg said.

The stalemate was broken when leaders of the Transport Workers Union, Local 100, and the Metropolitan Transportation Authority, meeting at a midtown hotel with state mediators, agreed to continue talks on contentious issues -- including wages, pensions and future healthcare benefits for the union’s 33,000 members.

The deal allowed both sides to save face: Union leaders flexed their political muscle and vowed to win a fair contract; state negotiators won an end to the strike and gave up nothing at the bargaining table.

“An agreement remains out of the parties’ reach at this time,” state mediator Richard A. Curreri said. “It is clear to us, however, that both parties have a genuine desire to resolve their differences. In the best interests of the public, they have agreed to resume negotiations while the union takes steps to return its membership to work.”

Bloomberg and Gov. George E. Pataki hailed the news, and union leaders expressed satisfaction that the unpopular strike was over. The work stoppage “was a very big test for our city,” the mayor said, “and I think it’s fair to say we passed with flying colors.”

The strongest reactions came from New Yorkers who suffered through three days of disrupted travel during the city’s busy holiday season.

“It has been a complete, total disaster,” said Mike Edmondson, a night janitor who works in Manhattan. “I hold a lot of people responsible.” Unable to return home to Brooklyn during the strike because it was too far to walk, he slept on the floors of the offices he cleans.

Edmondson voiced anger at the decision by transit workers to walk off their jobs. With any luck, he said, “I’ll be able to return home sometime Friday. I want to forget this ever happened.”

Others were elated that they would no longer have to wait for private vans, pay expensive cab fares or walk long distances to and from work.

As she hunted for a cab in midtown, advertising account executive Erica Keller looked relieved. “I’ve just moved to New York, and I never want to go through this again,” she said, shivering in the afternoon cold. “It’s been awful.”

Rumors of a breakthrough began circulating early Thursday. Union local President Roger Toussaint was supposed to appear at 11 a.m. in a Brooklyn courtroom.

Under state law, Supreme Court Justice Theodore T. Jones had fined the union $1 million a day, and employees were being docked two days’ pay for every day they were on strike. The judge was scheduled Thursday to consider jail terms for union leaders.

But amid news of a possible settlement, the hearing was put off, and Toussaint continued to meet with Curreri and other mediators.

Later in the afternoon, the union leader presented the deal to his executive board. They voted overwhelmingly in favor of the proposal to return to work.

Those who were against the settlement said they had lost key political leverage over the MTA by giving up the strike without winning any contract concessions; they also were angry that there was no promise by state negotiators to forgive the huge fines on Local 100.

“I do not understand the concept of giving up the stranglehold we had,” George Perlstein, an executive board member, said as he stood outside the union’s headquarters. “People have been calling me all day screaming bloody murder. They want full amnesty, and we got nothing. Absolutely nothing. It is unconscionable.”

The strike began Tuesday when union leaders, after weeks of discussions, said they were unable to reach agreement with the MTA. A key issue, Toussaint said, was the state’s demand that future transit employees pay more for healthcare and pension benefits than current union members pay.

He and other union leaders hoped to convince the public that the MTA’s demands were economically unjust. MTA officials tried to portray the union as selfish and greedy.

But the public’s lasting impression of the strike may be the vitriol that flew back and forth.

Bloomberg accused the union leaders of “thuggish behavior” in bringing the city to its knees. Toussaint in turn accused New York’s billionaire mayor of being out of touch with average New Yorkers who earn meager pay and work hard for a living.

The public seemed exasperated with both sides.

In a WNBC-Marist poll released Wednesday, 40% blamed the union and 39% held the MTA responsible.

And 80% said the workers should go back to the bargaining table even if their demands had not been met.