The second stage of the agreement is for a 393km section of a pipeline that will run from Jordan's Red Sea port of Aqaba to the Rihab power station in the north of the kingdom, near the Syrian border.
From there, the pipeline is due to be extended to the Syrian port of Banias. The gas supply deal is aimed at bolstering Arab economies and joint action, Jordan's King Abdullah II said after the signing ceremony.
Speaking at a meeting with the prime ministers of Egypt, Syria and Lebanon - Atif Obaid, Naji Otri and Rafiq Hariri respectively - the King said Arab countries should launch more similar projects to face economic challenges.
The deal was also signed by Jordan's Energy Minister Azmi Khraisat and a representative of Al-Fajr Company, a Jordanian-Egyptian joint venture.
King Abdullah and President Husni Mubarak of Egypt inaugurated the first section of the pipeline from Egypt to Aqaba in July last year. Egypt has proven natural gas reserves of 1656 billion cubic metres, according to October 2002 figures.