Announcement comes 10 days after the north seized the disputed Abyei region, prompting tens of thousands to flee.
North and south Sudan have agreed to set up a demilitarised zone along their shared border, as the south moves closer to independence.
The announcement, made by the African Union (AU) on Tuesday, comes 10 days after the north seized the disputed Abyei region, prompting tens of thousands of people to flee.
"The agreement ... establishes a Common Border Zone between North and South Sudan, which is to be demilitarised and jointly monitored and patrolled," an AU statement said, without adding further details.
Alex de Waal, an AU adviser who has facilitated negotiations on security issues between Sudan's north and south regions, said the parties agreed to the move on Monday during talks in Ethiopia's capital, Addis Ababa.
The common demilitarised zone will stretch along the length of the 2,100-kilometre north-south border.
'Serious crisis'
Colonel Philip Aguer, a spokesman for the south's army, said the southern military will support the agreement "100 per cent" if both sides can agree on the actual border.
"To me that is a good agreement, but the issue now is where is the border," he said.
Princeton Lyman, the US special envoy to Sudan, said the agreement on a demilitarised zone was an important step, but noted it did little to resolve the Abyei dispute.
"It's an important step ... it provides for demilitarising the border and sharing the monitoring, but it doesn't deal with the current crisis that is going on in Abyei," he told Al Jazeera.
Khartoum sent tanks and troops into Abyei on May 21, and has since defied calls from the United Nations, United States and south Sudanese officials to withdraw, saying the land belongs to the north.
Lyman called the situation in Abyei "one of the most serious crisis we've had in the Comprehensive Peace Agreement", referring to the 2005 peace deal that ended Sudan's civil war.
But southern officials have sought to downplay the tensions over Abyei, with Riek Machar, south Sudan's vice-president, saying on Monday that the two sides would form a committee to resolve the dispute.
Abyei 'deserted'
In Geneva, Adrian Edwards, a spokesman for the UN High Commissioner for Refugees, said that a field visit to Abyei town had found the area "virtually emptied" of its estimated population of 50,000 to 55,000.
Sporadic shooting could be heard as late as Monday.
"Large numbers of fighters were present on the streets. Pilfering was openly going on, with people apparently organising batches of stolen belongings," Edwards said.
South Sudan is scheduled to declare independence in July, but the two sides have yet to settle issues such as the position of the common border and sharing oil proceeds.
The South faces a host of challenges as it heads toward secession, including internal rebel movements, a serious lack of infrastructure and widespread illiteracy.
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