President Mugabe's supporters demand land reform
Foreign Minister Stan Mudenge said the government would pay "full and fair" compensation for any land it transfers from white farmers to poor blacks - so long as the former colonial power Britain and other countries fulfil promises to fund the programme.
The deal, signed in Nigeria, came after African nations added their voices to international concern about the situation in Zimbabwe.
The Commercial Farmers Union (CFU) welcomed the agreement, saying it could restore peace and justice in Zimbabwe.
Commonwealth secretary-general Don McKinnon also welcomed the deal in principle, but warned: "It is a matter now of ensuring implementation of the deal and that means a greater grip on the rule of law."
But he repeated government claims that it was not behind the violent occupations of white-owned farms by so-called war veterans.
He said: "Zimbabwe has no policy of intimidation and no policy of violence and will continue to ensure that there is no violence or intimidation."
Malcolm Vowles of the farmers' union said: "We hope the agreement will be implemented fully because we see in it a landmark towards restoring peace and justice in our country."
"I think we are slowly moving towards normalcy."
He told BBC News Online: "Where is the rule of law when our land was being taken from us?"
And he said there would be resistance if barren rather than productive land was given to them and if white farmers refused to co-operate in the exercise.
Rights monitoring
He also said Mr Mugabe, who he called their commander, is perhaps the "only one with the authority and not the courts, to ask them to stop their occupations".
Morgan Tsvangirai, leader of Zimbabwe's opposition MDC party, said: "I believe that everyone is agreed that land reform is imperative, but under the conditions of law and order.
"The government has had its fingers burned. I hope that it has learned its lesson and will refrain from this violence."
Under the deal, Zimbabwe has also agreed to allow close monitoring of the human rights situation in the country, and of its presidential election, due for next year.
In addition, it said it would safeguard freedom of expression and the press. Zimbabwe has expelled a number of foreign correspondents, and local journalists have complained of intimidation.
The BBC diplomatic correspondent says a question mark remains over whether or not the deal is simply an attempt to head off a row at the Commonwealth summit next month.
Neighbours' concern
Before the agreement was reached, Nigeria's foreign minister had made it clear that Zimbabwe's neighbours were becoming increasingly concerned as the 18-month crisis continues.
Until now, the issue of land reform in Zimbabwe has been regarded by other African nations as largely an internal matter.
Mr Mugabe and his government have been happy to keep it that way, accusing the former colonial power, Britain, of meddling in its affairs and of failing to pay reparations for land taken during colonial times.