"Real peace began with the signing of the Machakos protocol," President Omar Hassan al-Bashir said on state radio referring to the pact, which aims to end a 19-year-old conflict.
Analysts say there is still deep distrust between the two sides and many deals signed in the past have been violated. Renewed international interest in recent months, mainly from the United States, has restored the desire to end the war.
"We have agreed on the right of self-determination for the people of southern Sudan to be exercised after an interim period," Deputy Secretary-General of Sudan's ruling National Congress, Riek Gai Kok, said.
The deal envisages a transitional period of six years followed by an internationally supervised referendum. Secession would be an option included in the referendum. During the transition, a broad-based Government would rule from Khartoum, but southern provinces would be given some degree of autonomy.
A Sudanese communist said that even keeping sharia law in the North could undermine support for the deal. "Sharia law is unpopular in both the South and the North. Retaining it in the north is unlikely to bring peace to Sudan," he said, requesting anonymity
In Nairobi, a breakaway rebel group called the South Sudan Liberation Movement (SSLM) signed a separate agreement with the Government of Sudan to cease hostilities and have a referendum after a period of transition.