The deal gives greater rights to ethnic Albanians
The country's main political parties, representing both communities, reached the deal after lengthy talks involving international mediators.
The ethnic Albanians found it unacceptable that only 5% of members of the country's police force are from their community.
Under the deal, the number will be boosted to 25%.
It will mean around 1,000 ethnic Albanians being recruited over the next two years.
However, the new police force will remain under control of the central government in Skopje, and not be answerable to local leaders, as the ethnic Albanians had wanted.
They wanted the local set-up so that ethnic Albanian officers could run the force in majority areas.
Before the deal, the Albanian language had no formal status.
Under the deal, it becomes an official language along with Macedonian.
It can be used in official institutions in areas where ethnic Albanians account for at least 20% of the population.
Albanian-speakers also have the right to bi-lingual documents and identity cards.
Albanian can also now be used in the national parliament, but not in the government or in international affairs.
The introduction to the constitution is being changed to remove any reference to the ethnic background of Macedonians.
The old introduction described the country being the "national state of the Macedonian people", in which Albanians and other ethnic minorities had rights as equal citizens.
Under the deal, it will be changed to describe all Macedonia's population as "citizens of the Republic of Macedonia".
It promises human rights, civil liberties, social justice and peaceful co-existence.
The deal allows for limited devolution.
Some powers will be transferred from national government in the capital, Skopje, to local authorities and mayors.
This was also one of the ethnic Albanians' demands.
Other conditions of the peace deal have been met since it was signed. They include the granting of amnesties to rebel fighters by Macedonian authorities, and an agreement by the rebels to disarm.
The whole peace process must also be ratified by the Macedonian parliament, which is supposed to be carried out in stages as the weapons collection by Nato forces progresses.