Prime Minister Abdullah Nsur said the USD 980-million project is designed to provide Jordan with 100 million cubic metres of water a year.
"The government has approved the project after years of technical, political, economic and geological studies," Nsur told a news conference.
Under the plan, Jordan will draw water from the Gulf of Aqaba at the northern end of the Red Sea to the nearby Risheh Height, where a desalination plant is to be built to treat water.
The Dead Sea, the world's lowest and saltiest body of water, is on course to dry out by 2050.
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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.
However, environmentalists fear that an influx of seawater could undermine the Dead Sea's fragile ecosystem.
"We are thinking of selling desalinated water to Israel and buying water from Lake Tiberias (Sea of Galilee)," he said.
"A cubic meter of desalinated water would cost Israel one dinar (USD 1.4), while buying water from Tiberias will be cheaper for reasons related to transportation, costing us one-third of a dinar per cubic meter. It's a good deal," he added.
The water ministry says Jordan, where 92 per cent of the land is desert, will need 1.6 billion cubic metres of water a year to meet its requirements by 2015, while the population of 6.8 million is growing by almost 3.5 percent a year.
"The high cost of that project prompted the government to come up with the ideas we announced today, which we call the 'first phase'," Water Minister Hazem Nasser told the news conference.