Turkish and Armenian leaders have held several meetings in recent months
Turkey and Armenia have said they have agreed on a "framework" to normalise their bilateral ties, putting decades of strained relations behind them.
A statement by their foreign ministers said they had "achieved tangible progress and mutual understanding".
But it did not say how the neighbours would resolve their dispute over the mass killings of hundreds of thousands of Armenians by Ottoman Turks in 1915.
Turkey has condemned widespread efforts to have them defined as genocide.
The breakthrough comes just weeks after US President Barack Obama urged Turkey to come to terms with the past and resolve the issue.
In 2008 Mr Obama asserted that the "Armenian genocide is not an allegation, a personal opinion, or a point of view, but rather a widely documented fact supported by an overwhelming body of historical evidence".
Wednesday's talks between Turkey and Armenia took place away from the public eye, under Swiss mediation.
Afterwards, the two countries announced in a joint statement that they had agreed to "develop good neighbourly relations in mutual respect and progress peace, security and stability in the entire region".
"The two parties have achieved tangible progress and mutual understanding in this process and they have agreed on a comprehensive framework for the normalisation of their bilateral relations," it said.
"Within this framework, a roadmap has been determined."
Later, the US state department said it welcomed the agreement.
"It has long been and remains the position of the United States that normalisation should take place without preconditions and within a reasonable timeframe," spokesman Robert Wood said.
However, correspondents say it is not immediately clear how the neighbours will resolve their bitter dispute over the Ottoman-era killings of ethnic Armenians.
Hundreds of thousands of Armenians died while being forced out of Anatolia
Hundreds of thousands of Armenians died in 1915, when they were deported en masse from eastern Anatolia to the Syrian desert and elsewhere. They were killed by Ottoman troops or died from starvation or disease.
Armenians have campaigned for the killings to be recognised internationally as genocide - and some countries have done so.
Turkey admits that many Armenians were killed but it denies any genocide, saying the deaths were part of the widespread fighting that took place in World War I.
Turkey and Armenia have had no diplomatic ties since Armenia became independent from the Soviet Union in 1991.
Turkey closed its border with Armenia in 1993 in a show of support for its ally, Azerbaijan, which had a dispute with Armenia over Nagorno-Karabakh, the ethnic Armenian enclave of Azerbaijan.
Azerbaijan reacted to the announcement by warning that Turkish-Armenian relations should not be resumed without parallel progress over Nagorno-Karabakh - namely a withdrawal of Armenian troops.