According to CNN Turk, the agreement was signed by Azerbaijan's minister of industry and energy, Natig Aliyev, and Turkish minister of energy and natural resources, Taner Yildiz.
The agreement covers supplies of gas from Azerbaijan's Shah Deniz 1 and Shah Deniz 2 developments in the south-west of the Caspian Sea.
Speaking at the signing ceremony, Yildiz said that 'the two sides reached an agreement on the price and quantity of gas to be exported from the Shah Deniz II project, which will come onstream in 2017, to Turkey.'
The minister declined to give figures immediately. Turkey will be able export some of this gas to European countries.
An agreement was also reached on the price of natural gas Turkey imports from Azerbaijan, he said. Turkey will retroactively pay for the gas it purchased from 15 April 2008 at new prices.
Turkey currently receives some 6 billion cubic metres of gas from Azerbaijan and pumps some of that to Greece.
The agreement was signed during the visit to Istanbul of Azerbaijani President Ilham Aliyev.
An official statement on the deal is expected later today.
The Turkish-Azerbaijani agreement is expected to eliminate obstacles to the construction of the Nabucco gas pipeline to pump gas from the Caspian region to Europe via Azerbaijan, Georgia, Turkey, Bulgaria, Hungary, Romania and Austria.
Aliyev said in mid-May that if attractive offers were made, Azerbaijan might join new gas projects including Nabucco.
'We are trying to expand the geography of transportation and if we get favourable provisions, we may certainly join any gas project,' Aliyev told a news conference in May after meeting Turkish Prime Minister Recep Tayyip Erdogan.
He said Azerbaijan’s energy policy had always been open and the republic pursued a policy of diverse energy supplies.
'Considering our natural reserves, it is possible to say that Azerbaijan will present itself more widely as a gas exporter in the coming decades,' Ilham said.
Earlier on Friday Turkey completed ratification of the agreement on the construction of the Nabucco gas pipeline: the official state publication published the relevant order of the Cabinet of Ministers. The intergovernmental agreement will come into effect on 1 August.