Sudan and Chad have agreed to co-operate with the African Union and the United Nations to stabilise Darfur and the neighbouring region of Chad.
Chad shares a long border with Sudan's lawless Darfur region
The deal, signed by their presidents in Saudi Arabia, includes the formation of a joint border force and the deployment of observers to the war-torn region.
Both leaders also promised not to support each other's rebels.
Last month, their armies clashed in Darfur. Earlier peace deals have failed to ease tension between them.
Chad shares a long border with Sudan's lawless Darfur region, where some 200,000 people have died during a four-year conflict and the border areas have a similar ethnic make-up.
The conflict in Darfur has spilled over the border, forcing some 120,000 Chadians to join the more than 200,000 Sudanese refugees in camps.
Sudan's Omar al-Bashir and his Chadian counterpart Idriss Deby signed the reconciliation deal after a summit hosted by Saudi's King Abdullah.
Correspondents say the two presidents appeared relaxed and smiling during the signing ceremony.
"The two sides will adhere to working with the African Union and the United Nations to end the conflict in Darfur and east Chad to realise stability and peace for all," Reuters news agency reports a Saudi official as saying.
The UN has approved funding for an 11,000-strong force to be sent to stabilise the eastern border region, although Chad has said it only wants a police operation, not a military one.