Jordan will transfer desalinated water to Israel for use in the Negev, a desert and semidesert region in southern of occupied lands. This is while Israel will reciprocate with drinking water from the Kinneret.
The plan is reportedly set to save Jordan the cost of moving water from the south of the country to the north.
Its goal is to establish a permanent mechanism as an alternative to the one agreed upon in the 1994 peace treaty.
"The government has approved the project after years of technical, political, economic and geological studies," Prime Minister Abdullah Nsur told a news conference.
He said that the $US980 million ($A1 billion) project is designed to provide Jordan with 100 million cubic metres of water a year.
"The desalinated water will go south to Aqaba, while salt water will be pumped to the Dead Sea," Nsur said.
The Dead Sea, the world's lowest and saltiest body of water, is on course to dry out by 2050.
The degradation of the Dead Sea started in the 1960s when Israel, Jordan and Syria began to divert water from the Jordan River, the Dead Sea's main supplier.
However, environmentalists fear that an influx of seawater could undermine the Dead Sea's fragile ecosystem.
NJF/NJF