The deal, which still needs to be approved by the heads of state of Egypt, Ethiopia and Sudan, appears to be an important breakthrough, observers say - although details of the agreement have not yet been made public.
"This is significant in my view," Mwangi Kimenyi, a Brookings Institute fellow who co-authored a book on the need for a new legal regime on sharing Nile water, told Al Jazeera. "Any development in the sharing of Nile water that is based on negotiations between the stakeholders is a positive development."
The deal is important because it marks a move away from Egypt's historical insistence on maintaining colonial-era agreements on water rights.