The UAE will build a pipeline connecting Ethiopia to the Eritrean port of Assab, state media have reported.
The agreement was reportedly made during discussions in Addis Ababa between Ethiopian Prime Minister Abiy Ahmed and UAE Minister of International Cooperation Reem Al-Hashimy.
The state-affiliated Fana Broadcasting Corporate did not provide details on the agreement.
Landlocked Ethiopia used an oil refinery located in Assab port for its domestic oil needs before a two-year war over the demarcation of the border broke out between the two countries in 1998, leaving some 80,000 dead before settling into a bitter cold war.
In a surprise move in June, Ethiopia's new reformist Prime Minister Abiy Ahmed announced he would finally accept a 2002 United Nations-backed border demarcation, paving the way for peace between the two nations.
Reciprocal visits by the two nations' leaders led to the resumption of flights between their capitals as well as the opening of embassies and phone lines.
The UAE, which is reportedly using the Assab port to conduct military operations against Houthi rebels in Yemen, has been seen as a key mediator in the diplomatic thaw between Ethiopia and Eritrea.