The official Petra news agency said that the agreement signed in the Jordanian capital, Amman, would set in motion the implementation of the first phase of a long-awaited project.
It follows a letter of intent signed in Washington in December 2013 by representatives from Israel, Jordan and the Palestinian Authority that capped more than a decade of negotiations.
The agreement, signed in the presence of representatives from the United States and the World Bank, stipulates the construction of a canal to channel water from the Red Sea to the Dead Sea.
In all four pipelines would be built, with the ambition of eventually pumping two billion cubic metres of water when the project is completed.
Also Read
The Dead Sea, the lowest and saltiest body of water in the world, is on course to dry out by 2050.
The degradation of the Dead Sea started in the 1960s when Israel, Jordan and Syria began to divert water from the Jordan River, the Dead Sea's main supplier.
The Palestinians are expected to obtain 30 million cubic metres of potable water annually thanks to the project.
Nasser said Jordan will start drawing up documents in the next few weeks calling for international tenders.
He said the deal, signed for Israel by Energy and Water Resources Minister Silvan Shalom, safeguards Jordan's national interests.
Shalom, who is also minister of regional cooperation, hailed the agreement as a landmark deal between Israel and Jordan, which signed a peace treaty in 1994.