While still a framework, the deal marked the biggest breakthrough towards resolving the conflict that has killed thousands and upended energy markets since it began with joint US-Israeli strikes on Iran in February.
"The Deal with the Islamic Republic of Iran is now complete," US President Donald Trump wrote on his Truth Social platform.
His post came shortly after Pakistani Prime Minister Shehbaz Sharif, whose country has served as a mediator, announced a deal had been struck early on Monday.
The memorandum of understanding is scheduled to be officially signed on Friday in Switzerland.
The precise terms were not immediately known.
Sharif said in a post on X the pact called for "the immediate and permanent termination of military operations on all fronts, including in Lebanon."
Lebanon has suffered the deadliest spillover of the conflict, with thousands of people killed and some 1.2 million people uprooted by an Israeli offensive against the Iran-backed Hezbollah group, which opened fire on Israel in support of Tehran on March 2.
The country has been a sticking point in negotiations, with Israel and Hezbollah ignoring calls from Trump and others to stop their attacks on each other in recent weeks.
The secretariat of Iran's Supreme National Security Council said war and military operations on all fronts, including Lebanon, would end permanently starting on Monday night.
Iran's Foreign Minister Abbas Araqchi said there must be a complete halt to Israeli attacks against Lebanon and wrote on Telegram the US bears responsibility for implementing the framework deal.
Israeli Prime Minister Benjamin Netanyahu has yet to respond publicly to the US-Iran agreement.
But Defence Minister Israel Katz said that Israel would oppose any pressure to withdraw its forces from areas it is occupying in southern Lebanon.
"This is the main lesson from the events of October 7," Katz said. "Prime Minister Netanyahu made this clear to US President Trump and other senior American officials, and I also clarified it yesterday to US Defence Secretary Pete Hegseth."
Iran's deputy foreign minister, Kazem Gharibabadi, said a more expansive agreement on the wider conflict would be negotiated during a 60-day ceasefire period, including sanctions relief for Iran.
Trump said the Strait of Hormuz, a major shipping route for global oil supplies that Iran has effectively shut down for months, would open on Friday, and that he had ordered the end of the US blockade of Iranian ports.
"Ships of the World, start your engines. Let the oil flow!" Trump wrote. Oil prices fell on the news.
Brent crude futures plummeted 5.3 per cent to $US82.73 a barrel in early trading on Monday while world stock markets jumped.
The agreement was sealed despite Israeli air and artillery attacks across southern Lebanon overnight and into Monday. The strikes drew criticism from both Iran and Trump.
Iran made a full ceasefire in Lebanon an important component of its demands.
Leaders outside the Middle East welcomed the deal announcement. In a joint statement, Britain, Germany, France and Italy said they were prepared to lift sanctions on Iran in response to "clear, verifiable steps" to limit its nuclear program.
China also welcomed the deal. Before it was announced, a senior Iranian official told Reuters that, under the terms of the draft, the US would agree to release $US25 billion of frozen Iranian assets.
The Trump administration has previously said any release of Iranian money would only take place once Iran has fulfilled certain conditions under a peace deal.
A US official, also speaking before the announcement, said the agreement would ultimately lead to the dismantling of Iran's nuclear program, with its stockpile of highly enriched uranium to be destroyed and removed.
The senior Iranian official said the draft deal would allow Iran, which denies seeking a nuclear bomb, to dilute its enriched uranium inside the country.
with Reuters and AP
