The Caspian Sea area is the the world’s biggest enclosed body of water and the five nations, Russia, Iran, Kazakhstan, Turkmenistan and Azerbaijan, have argued over its divide for almost 30 years.
Some of the dispute, on the delimitation of the seabed, will require further negotiating.
The timely deal follows a vow made by US president Donald Trump to implement sanctions against Iran’s energy industry in an attempt to restrict its trade of oil.
The Caspian Sea dispute began with the fall of the Soviet Union which had had a clearly defined Caspian border with Iran.
In negotiations with post-Soviet nations, Tehran has insisted on either splitting the sea into five equal parts or jointly developing all of its resources.
None of its neighbours agreed to those proposals and three of them — Russia, Kazakhstan and Azerbaijan have taken turns trying to develop projects in the sea and have resorted to scaremongering with warships to scare off contractors hired by other nations.
Many projects could be boosted by the deal.
Among them is a pipeline across the Caspian that could transport natural gas from Turkmenistan to Azerbaijan and further afield to Europe.
This route would enable the two nations to compete with Russia in western oil markets.
The states have also disputed some oil and gas fields, further delaying such projects.
But Azerbaijan still needs to agree on how to divide oil and gas fields with Iran and Turkmenistan, including the Kapaz and Serdar fields, which holds reserves of around 620 million barrels of oil.
Ashley Sherman, principal Caspian analyst at energy consultancy Wood Mackenzie, said it could pave the way for new projects.
He said: «Stranded fields and frozen exploration projects may well come back on the agenda.”
He believed that the “unprecedented milestone” would only yield a limited boost to production in the short term.
But he said the increasing intent for joint projects in the south Caspian is very promising.
The deal comes after Mr Trump’s crackdown on imported oil.
After quitting the Iran nuclear deal Mr Trump threatened to block all businesses trading with Iran from accessing the US market.
Nations including Russia and China rejected the threats, which also come as the US imposes harsh sanctions on steel and aluminium imports.
In response to the sanctions, Iran has threatened to close the Strait of Hormuz, an oil shipment route, which could lead to the prices of oil rocketing.
Around 30 per cent of all seaborne-trade crude oil goes through the Strait of Hormuz and a temporary closure could benefit oil producers in the US and Russia, who could increase production from their own oil wells.