Jordan's King Abdullah and Syrian President Bashar al-Assad have launched a large water project at a ceremony on the River Yarmuk in northern Jordan.
The two leaders unveiled a plaque to mark the start of work on the Wahdah Dam, before heading to the Syrian capital, Damascus, for talks.
The $90m dam - due to be completed by the end of 2005 - will provide Jordan with water and Syria with power.
The dam's construction has been delayed due to funding difficulties.
Jordan's Water Minister, Hazem Nasser, warned that the dam "will not solve Jordan's water problems".
But he said it would make an "important contribution by reducing by around 10% Jordan's water deficit".
The hydro-electric project linked to the dam is expected to produce 18,800 megawatt hours of electricity a year.
Most of the power will be supplied to Syria.
Storage capacity of 110m cubic metres
81m cubic metres of water a year will be supplied to Jordan
50m cubic metres will be used to supply drinking
water to the Jordanian capital Amman and the main northern city of Irbid
Will generate 18,800 megawatt hours of electricity a year
Mr Nasser said Jordan would foot the large proportion of the bill for the dam's construction.
The dam's launch has ended a dispute between the countries that began two months ago.
During a visit to the US, King Abdullah said Syria's border with Iraq needed to be better secured against the passage of militants fighting the US-led coalition forces.
His remarks angered Damascus, but Jordanian officials have said the matter was exaggerated by the press.
The two leaders had been due to lay the cornerstone in December but that meeting was postponed for "technical reasons" that were never publicly explained.