India and the US are to conduct joint research experiments on the Moon.
India is also considering a manned mission to the Moon
Under an accord between the countries' space agencies, India's first unmanned lunar mission will carry two scientific payloads from the US agency, Nasa.
Indian officials called the deal a "milestone". The Indian spacecraft is due to be launched in early 2008.
The Nasa instruments will scan the Moon's surface for minerals and ice. Devices from the European Space Agency and Bulgaria will also be on board.
The deal is being seen as another sign of increasingly close ties between Washington and Delhi after years of Cold War suspicion.
Earlier this year, the two countries finalised a landmark deal on civilian nuclear co-operation.
The US and India have also agreed to co-operate in civil space, including areas such as space exploration, satellite navigation and Earth science.
Indian Space Research Organisation (Isro) chairman Madhavan Nair signed the agreement with Nasa chief Michael Griffin in the southern Indian city of Bangalore.
"Today is an important milestone in the co-operation between Nasa and Isro," Mr Nair told reporters.
Mr Griffin said the pact was "an important partnership to advance the exploration of the Moon".
"The two-year mission of Chandrayaan-I to map the lunar surface and investigate its surface properties will advance knowledge about the Moon's history and evolution, and inform future exploration decisions by characterising the content of the lunar soil," he said.
This was the first visit by a Nasa chief to India in 30 years. The US imposed an embargo on Isro, following India's nuclear tests in 1998.
Mr Nair urged the US to lift certain sanctions that are still in place and allow more high-tech imports.
Chandrayaan-I would be launched in early 2008 from Sriharikota on India's east coast, Mr Nair said.
The European Space Agency (Esa) will also deploy four scientific instruments aboard the spacecraft, which will orbit the Moon at a distance of 100km (62 miles).
On the subject of a manned Indian mission to the Moon, Mr Nair said no decision had been taken.
And asked whether the US might fly an Indian astronaut on one of its space shuttles, Mr Griffin said "we can train but we don't have any seats for the next eight years".