Rival Somali leaders had been holding separate talks with Arab officials in the Sudanese capital, Khartoum, before meeting each other in an attempt to end the conflict in their country.
The agreement, signed by both sides on Thursday, recognises "the legality of the transitional government and the presence of the alliance of Islamic tribunals," Amr Moussa, the Arab League secretary-general, said after mediating the talks.
Both sides also urged an end to media and military campaigns and agreed to hold further talks on July 25, officials said.
The head of the delegation from the Islamic Courts Union, which removed US-backed regional commanders from the Somali capital on June 5 after weeks of deadly fighting, had said earlier he was willing to negotiate an end to the Somali crisis.
Ali Mohammed Ibrahim, a Muslim scholar, said on Thursday: "We have come to the negotiations to find a solution to Somalia's problems, with assistance from our Arab brothers."
Thursday marked the first meeting between Arab League officials - including Moussa - and the Islamist delegation.
Somalia's transitional government, which remains largely powerless outside of its base in the provincial town of Baidoa, suspects the Islamists of seeking to overrun the entire country.
The group, which has seized control of much of southern Somalia, has pledged to re-establish order and begun imposing Sharia (Islamic law) in the areas it controls.
About 360 people have been
killed in recent fighting
The US, concerned that Somalia could develop into a Taliban-like state, was widely believed to have backed an alliance of of secular regional commanders opposing the Islamists.
About 360 people have been killed and 2,000 wounded in fighting between the Islamic courts group and the US-backed local commanders.
Somalia has lacked an effective government since Mohammed Siad Barre was toppled in 1991.
More than 14 international efforts have failed to restore a functioning administration in the lawless nation of 10 million.