Plunged into chaos since the 2011 overthrow of dictator Muammer Gaddafi, Libya has two parliaments and governments vying for power, as a slew of armed groups battle for control of its oil wealth.
The elected parliament which initialled Saturday's agreement in Morocco, along with some members of political parties and civil society and local officials, is based in the eastern city of Tobruk.
The rival General National Congress (GNC) is based in Tripoli and was set up by a militia alliance, including Islamists, known as Fajr Libya, after it seized the capital last August.
The GNC boycotted yesterday's ceremony in the Moroccan resort of Skhirat, saying Leon's draft deal was not "satisfactory" and calling for "modifications".
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Nevertheless, UN Secretary General Ban Ki-moon was "encouraged" by the initialling of the accord, a UN statement said.
"He looks forward to the speedy conclusion of the full agreement and its implementation," a spokesman for the UN chief said.
"This act is a clear demonstration of political will and courage and brings the country one step closer to resolving the current institutional and security crisis."
The UN Security Council has urged Libyan factions to sign on to Leon's proposals in a bid to stem rising violence and the spread of radical organisations such as the Islamic State group.
The jihadists have taken advantage of Libya's divisions to establish itself in the country, close to Europe's shores.
Italy and the European Union also welcomed the agreement as a step toward restoring peace.