The agreement brings a long-awaited Red Sea-Dead Sea pipeline one step closer to completion.
The plant will be built in the southern Jordanian port of Aqaba on the Red Sea and will desalinate water to be shared by the neighbors.
The salty by-product, known as brine, will be sent north in a 112-mile pipeline to the Dead Sea.
The idea of linking the two bodies of water has been around for more than a century. The Dead Sea has been found to be receding at a rate of more than 3.3 feet every year.
Under the agreement, Israel also plans to release more water from the Sea of Galilee, its largest reservoir, to Jordan, and sell desalinated water to the Palestinian Authority. Palestinians have long complained about Israeli restrictions on constructing new water infrastructure, which they say exacerbate water shortages.
Ministers from the three governments gathered on Monday at the Washington headquarters of the World Bank, the poverty-fighting institution that brought them together and plans to help them implement the projects.
“I am pleased that the long-term engagement of the World Bank has facilitated this next step by the three governments, which will enhance water availability and facilitate the development of new water through desalination,” Inger Andersen, the World Bank’s vice president for the Middle East and North Africa, said in a statement.
The World Bank did not say how much the project would cost or who would pay for it.
The agreement was reached after the World Bank determined in January that it is possible to use the Red Sea to replenish the shrinking Dead Sea after years of studying whether such a connecting lifeline could work.
The World Bank said the current phase of the agreement was limited, designed to provide new water to a region critically short of it and the chance to study what happens when Red Sea and Dead Sea waters are mixed.
Environmental groups have long warned of the adverse effects of a pipeline, such as the possibility of new algae and mineral-deposits changing the color of the Dead Sea.
The Dead Sea, technically a lake, is a tourist spot famous for its salty waters that allow bathers to float. Its mineral-rich mud, used for skin treatment, is sold around the world.
As the population has increased in the region, water has been diverted from the Jordan river, the Dead Sea’s natural water source, for drinking and agriculture.
The shoreline has shrunk at an accelerating pace, leaving behind a rocky, desert beach full of dangerous sink holes. Factories extracting minerals from the lake have also contributed to the shift in coastline.