The agreement aims at "safeguarding both parties from any legal pitfalls" and covers every aspect of the ongoing Australia-led recovery process of the Malaysia Airlines Flight MH370 in the southern Indian Ocean.
The MoU will also address specific areas, including which parties will handle the wreckage or any parts of the plane, including the black box, once found.
Another critical area concerns the handling of human remains, the New Strait Times reported.
It will come into effect as soon as any part of the Boeing 777-200 is found but details will not be made public, said Azharuddin Abdul Rahman, director-general of the Department of Civil Aviation.
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"The MoU spells out exactly who does what and the areas of responsibility," Azharuddin said, adding that Malaysia would lead most of the investigation, with Australia and other foreign agencies, assisting.
The deal also addressed the question of who would carry out autopsies on the remains of the passengers, according to a source.
The scope and breadth of the MoU is comprehensive, detailing even where the remains will be brought to immediately upon recovery and where they will be taken to for autopsy, as the 239 people on board the missing airliner came from 15 different countries, including India.
"The 13 other governments whose citizens were on board the aircraft will also be approached to see how we can best handle them," the source said.
A multinational hunt has so far not succeeded in tracking the aircraft despite deploying hi-tech gadgets. Investigators are looking into a range of aspects, including hijack, sabotage, personal and psychological problems, that may have caused the incident.
Malaysia has been criticised for its handling of the tragedy, particularly by the relatives of the Chinese passengers on board the ill-fated plane, besides being accused of hiding information.