"The Political Agreement between President Ghani and Dr Abdullah Abdullah has just been signed," said Sediq Sediqqi, Ghani's spokesman, on Twitter.
Dr Abdullah would lead the council for peace talks with the insurgent Taliban and his team members would be included in cabinet, Sediqqi added.
Seddiqi said more details would be released shortly. It was not immediately known which ministerial positions Dr Abdullah's camp would control.
Dr Abdullah had disputed the results of an election in September and announced the formation of a parallel government earlier this year, undermining Mr Ghani's administration at a time when the United States was trying to advance a peace process with the Taliban to end the 19-year Afghan war.
Discussions over the final sticking points including the allocation of some key posts had been under way throughout the day, three sources said.
Dr Abdullah had wanted to control a major portfolio such as finance or foreign affairs and while Mr Ghani had not agreed to this, he could offer control of the interior ministry, sources said shortly before the deal was signed.
Washington has been frustrated by the growing impasse between the two men even after Secretary of State Mike Pompeo travelled to Kabul in March to mediate. It had announced it planned to cut $1.6 billion in aid because the men could not agree.
It was not immediately clear whether this agreement would result in the aid commitment being reinstated.
US Secretary of State Mike Pompeo meets with Abdullah Abdullah in March (AAP) Source: Sepidar Palace
Afghanistan is facing growing fiscal pressures, with tax revenues falling and foreign aid pledges due this year expected to shrink.
Officials say a deal between Mr Ghani and Dr Abdullah is crucial to launching peace talks, as Dr Abdullah's camp represents much of the country's northwest.
But the talks face a number of stark challenges, as violence in the country increases. An attack on a Kabul maternity ward this week prompted Mr Ghani to switch the military to an "offensive" stance against insurgent groups.
The Taliban has denied involvement in the attack, but the government has remained sceptical and angry at ongoing Taliban attacks against the Afghan military, fraying the momentum for peace talks, which were due to start in March.
US Special Envoy Zalmay Khalilzad said on Friday that a new date for intra-Afghan peace talks was under discussion and he would soon travel to the region and try to encourage a reduction in violence.
