The agreement would allow the separatists and other southerners to join a new Yemeni cabinet and would place southern armed forces under the control of the Yemeni government.
The UN said the deal was an important step towards ending Yemen’s civil war.
The conflict has devastated the country and claimed the lives of at least 7,000 civilians, according to the UN.
Residents of the Southern city of Aiden welcomed the agreement, saying that they hope it will put an end to the fighting and pave the way for a complete peace agreement in the future.