Damane Zakaria, the military chief of the rebel Union of Democratic Forces Coalition, (UFDR), signed on that group's behalf.
Zakarai said: "We are all ready to extend our hands to begin the reconstruction of our country. The time has come to make peace."
The UFDR are only one of several rebel groups active in the impoverished nation of 3.6 million - another rebellion has waxed and waned in the northwest.
Still, the proposed peace deal could bring stability to the northeast, where French mirage jets were recently sent to bombard Birao in an effort to put down the rebellion.
"We are all ready to extend our hands to
begin the reconstruction of our country"
Damane Zakaria, military chief of the rebel Union of Democratic Forces Coalition
According to a draft of the peace accord shown to The Associated Press, both government forces and UFDR rebels have agreed to end hostilities.
The UFDR has agreed to station its men in an army cantonment, from where they will eventually be reintegrated into the national army.
In return, the government has agreed to accept the UFDR as a political party, which will contribute to the management of the country so long as it does not resort to violence, the draft agreement said.
A law will also be passed extending an amnesty to former UFDR fighters and a joint committee will be set up to monitor the peace process, the draft document said.
Francois Bozize, the president, along with UN officials flew to Birao, roughly 530km from the capital of Bangui early on Friday morning to oversee the signing. Also in attendance was the French military attache to Central African Republic.
France recently sent 100 extra troops to join its 200 soldiers stationed in the Central African Republic in order to help the government counter the rebellion and to help secure its borders with Chad and Sudan, both wracked by internal conflict.