Kim Jong-un has agreed to shut down one of North Korea's main missile testing and launching sites, says South Korea's President Moon Jae-in.
After meeting in Pyongyang, the two leaders "agreed on a way to achieve denuclearisation," said Mr Moon.
The agreement was described by Mr Kim as a "leap forward" towards military peace on the peninsula.
Mr Kim also said he hoped to "visit Seoul in the near future" - he would be the first North Korean leader to do so.
The Koreas also plan to link up their railways, allow reunions for families separated by and co-operate on health care.
'Kim to visit Seoul'
Speaking after the signing in Pyongyang, Mr Moon said Mr Kim had "agreed to permanently close the Tongchang-ri missile engine test site and missile launch facility in the presence of experts from relevant nations".
He said Mr Kim had also agreed to shut down the Yongbyon nuclear facility, but only if the US took some reciprocal action.
On Monday, the two leaders drove through the streets of Pyongyang in an open top car
The two countries will also seek to co-host the 2032 Summer Olympics.
The South's defence minister and the head of the North Korean army also signed an agreement to further reduce military tensions.
The latest signing comes during a three day visit to Pyongyang by Mr Moon.
While it is the first trip to the North Korean capital in a decade by a leader from the South, it is Mr Moon's third meeting with Kim Jong-un since their historic summit in April.
Breaking the deadlock
North Korea has embarked on an unprecedented series of meetings this year with both the South and the US.
But efforts towards denuclearisation between the North and the US had recently hit a deadlock and there's hope the South will continue to act as a mediator.
The US and North Korea held their own historic meeting in June when US President Donald Trump and North Korea's Kim Jong-un agreed in broad terms to work towards denuclearisation.
The June Trump-Kim summit has so far yielded limited results
Since then though, there's been little progress with no clear process nor timeline laid out. Most observers warn that so far the North has taken no meaningful steps to ending its controversial nuclear weapons programme.
While the US wants denuclearisation first and an easing of sanctions second, North Korea hopes for a step-by-step process where each concession by Pyongyang will lead to a gradual easing of the sanctions regime.
Given that deadlock, the US last month called off a trip by Secretary of State Mike Pompeo to North Korea, citing a lack of progress.
However, Mr Trump recently said that he and Mr Kim would "prove everyone wrong" after he received an invitation from the North Korean leader for a second summit. Both sides say they are working on making that meeting happen.