The International Compact is jointly chaired by the Iraqi government and the UN and backed by the World Bank.
In joint statement the UN and Iraq said that it aims to "bring together the international community and multilateral organisations to help Iraq achieve its National Vision," over the next five years.
"The government's vision is that five years from now, Iraq shall be a united, federal and democratic country, at peace with its neighbors and itself, well on its way to sustainable economic self-sufficiency and prosperity, and well integrated in its region in the world," the statement said.
The primary focus of the compact is "building a framework for Iraq's economic transformation and integration into the regional and global economy," it said.
The compact will be overseen by an executive committee including Iraq and UN officials, the World Bank, the IMF, and other regional financial institutions.
Under the compact Iraq commits itself to treating all of the country's ethnic groups fairly and equally sharing its oil resources through a transparent energy sector. It also vows to fight corruption and keep to rigorous budgets.
The United Nations for its part obliges itself to help Iraq achieve these goals through its Baghdad mission and other international agencies based in Iraq.
The statement also includes a cooperation agreement with the World Bank.
Security measures
With sectarian violence still the biggest problem facing Iraq the Pentagon extended the tours of about 3,500 US troops in Iraq for 120 days.
The move has dashed hopes of a reduction in the US force this year in the face of the surging violence.
The Pentagon also identified army and marine units totalling about 25,000 troops that have been scheduled to deploy to Iraq late this year and early next.
The extensions are enough to maintain the US force in Iraq at about 130,000 troops for a year.
"Additionally, the Secretary of Defence approved a request by the commander of Multi-National Forces-Iraq (MNF-I) to extend the deployment of the 172nd Stryker Brigade Combat Team operating in Iraq for up to 120 additional days," the Pentagon said.
The move indicated that US commanders have effectively given up hopes for even a gradual reduction in the US force this year on account of a bitter insurgency and spiralling sectarian violence.
The plan to beef up security in the capital reportedly will add an extra
4,000 US troops and an equal number of Iraqi troops to those already there.
Pentagon officials said the troops being held back will not necessarily be used in Baghdad, but they will free up other troops for duty in the capital.