The BBC's Andrew Cassell: "The signing of the agreement was a relatively simple affair"

The deal makes the Lib Dem leader Jim Wallace the parliament's deputy first minister, second to Labour's Donald Dewar.

It also gives the Lib Dems another seat in the executive (Cabinet).

Speaking at the signing ceremony at the Museum of Scotland in Edinburgh, Mr Dewar said the agreement was based on "collective responsibility".

BBC Scotland's political correspondent Kenny MacIntyre reports on the deal

"In many areas the approach of the two parties has had a great deal in common," he added.

Scottish National Party leader Alex Salmond, MSP, accused Mr Wallace of "selling out for a deputy's badge".

He said the coalition agreement was simply a reprint of Labour's manifesto.

David McLetchie: "Shabby" deal

The Conservatives' leader David McLetchie, MSP, described the deal as "shabby, a deceit and betrayal" and said it had "sold out Scotland's students and their families".

But Mr Wallace denied selling out his party. "We have maintained our policies, we have maintained our principles.

Jim Wallace sets out the Lib Dems' position on fees

"More than that, we are now going to have the opportunity to put these policies and principles into practice," he stressed.

Fourteen of the 17 Liberal Democrat MSPs backed the agreement after what has been described as a "bruising" four-hour meeting in Edinburgh. Earlier, Labour MSPs had endorsed the deal.

'Traumatic' meeting

BBC Scotland's political correspondent Kenny MacIntyre said it had been a "traumatic" meeting in which one MSP had threatened to quit the party and become an independent.

There was confusion over whether the deal allows Lib Dems a free vote on the findings of the three-month review on student funding.

Lib Dem MSP Donald Gorrie, who with Keith Raffan and John Farquhar-Munro voted against the deal, said: "We have been assured there is a free vote on tuition fees."

Mr Dewar said individuals would be able to submit their views to the review body set up by the executive but that a final decision would be taken on the basis of collective responsibility.

This was backed up by Mr Wallace: "It is our expectation that we will be able to find the basis for a collective decision which we will be able to recommend to our parties in parliament."

Abolition commitment

He stressed that the party was still committed to the abolition of tuition fees.

Mr Dewar said he was satisfied with the compromise on student finance.

He said: "There is going to be a genuine investigation. The Committee of Vice-chancellors, the Association of University Teachers, the National Union of Students and a very substantial number of very distinguished academics have said it would be counter-productive and quite wrong simply to abolish tuition fees.

"This is a complex matter and all the options will be considered before we move. That is absolutely right and it is what a thinking parliament wants to do."

Labour is the only party in the parliament against scrapping fees - a move which it previously said would throw the education system into chaos.

Fees 'outside agreement'

Nicol Stephen: "Lib Dems can maintain opposition to fees"

Lib Dem education spokesman Nicol Stephen, MSP, said: "The tuition fees issue would be placed effectively outside the partnership agreement and the Liberal Democrats would be able to maintain their opposition to tuition fees."

On finance, the agreement states: "We will not use the tax-varying power in the course of the first parliament." Previously the Lib Dems said they would be prepared to use the powers in the first term under certain circumstances.

It includes a freeze on Skye Bridge tolls, an issue which has proved highly contentious in the Highlands.

It will also mean an extra £80m for education.

Labour has moved on the Private Finance Initiative, saying it will continue the principle but look at ways of returning capital projects to the public sector at the end of the contract period.