Unification of the two regional governments, one headed by the Kurdistan Democratic party (PDK) and the other by the Patriotic Union of Kurdistan (PUK) was unanimously approved by the 111-member parliament in Arbil on Sunday.
Adnan Mufti, the speaker of the Kurdish parliament, said after the 111 parliamentarians voted in favour of one administration: "We now have one government for Kurdistan."
Until now, PUK, headed by Jalal Talabani, the Iraqi president, was responsible for running Sulaimaniya province, and PDK, led by Massoud Barzani, a Kurdish regional president, ran Arbil and Dohuk.
The step created a joint cabinet, with PUK and PDK each having the lion's share of ministers. The rest will be from other smaller parties.
Barzani said the unification will help the Iraqi central government in its bid to realise political stability and security.
"The new government of Kurdistan is not only for the Kurds, but for the other sects and ethnic groups such as the Christians and Turkomen"
Kurdish regional president
"The new government of Kurdistan is not only for the Kurds, but for the other sects and ethnic groups such as the Christians and Turkomen," he said.
A host of Iraqi leaders and international officials led by Zalmay Khalilzad, the US ambassador to Iraq, were present for the vote.
It was still not clear whether the Kurdish forces of the two administrations were to be merged, but key ministries of finance, interior and justice were to be unified.
Kurds have enjoyed self-rule in three provinces of the north of Iraq but under the separate administrations.
Talabani (L) and Barzani sign
the unity agreement
The single adminstration is also expected to reaffirm Kurdish territorial claims, especially for the ethnically mixed oil-hub of Kirkuk that Kurds consider their own and is located just south of their autonomous region.
Since 1998, rivalries between the two formerly warring Kurdish factions had prevented repeated attempts to set up a joint administration.