"The Deal with the Islamic Republic of Iran is now complete," US President Donald Trump wrote on his Truth Social platform on Sunday evening (local time) in Washington.
His post came shortly after Pakistan Prime Minister Shehbaz Sharif, whose country has served as a mediator, announced a deal had been struck early on Monday (local time).
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 that the pact called for "the immediate and permanent termination of military operations on all fronts, including in Lebanon."
Lebanon 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.
In a statement, 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.
There was no immediate reaction to the announcement from Israel, which has said it was not party to the US-Iran talks.
Strait to reopen
Trump said the Strait of Hormuz, a major shipping lane for global energy 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 fell 4% in early trading on Monday, while US West Texas Intermediate slid more than 4.6%. Stock markets in Asia jumped.
Former Biden administration State Department spokesperson Matthew Miller said Trump had made important concessions to Iran to achieve the status quo that existed before he launched the war.
"We have no assurances the nuclear program will ever be addressed, but Iran has shown the world it can take the global economy hostage and get something from the US in return."
Thousands of people have been killed, mostly in Iran and Lebanon, since US and Israeli forces first attacked Iran on February 28 this year. Iran has struck Israel and Gulf states hosting US bases and has effectively blockaded the Strait of Hormuz, pushing up global energy prices. US forces have blocked Iranian ports in response.
There was no immediate reaction to the announcement from Israel, which has said it was not party to the planned US-Iran deal.
The Iran war has become a political liability at home for Trump and his fellow Republicans in Congress, with public opinion polls showing Americans deeply frustrated by rising gas prices ahead of November's midterm elections. But Trump has also faced pressure from members of his own party who insist that Iran's nuclear programme must be completely shut down.
Republican Senator Lindsey Graham, a leading Iran hawk, praised the deal but said he would be "watching closely" the coming negotiations on Iran's nuclear programme.
"Under our law, any nuclear deal with Iran will be sent to Congress for review and a vote. Congratulations to all in getting us to this point."
During his first term, Trump withdrew the US from a 2015 multilateral Iran deal, negotiated by Democratic President Barack Obama, that lifted sanctions on Tehran in exchange for limits on its nuclear programme, including international inspections.
Iran responded by ramping up its enrichment of uranium, producing more than 400kg of material at close to bomb-grade purity. The eventual fate of that uranium is likely to be a key negotiating point during the upcoming talks.
Netanyahu 'a very difficult guy'
The agreement was sealed despite an Israeli strike on Lebanon on Sunday that drew criticism from both Iran and Trump.
Prime Minister Benjamin Netanyahu has differed with Trump over American demands that Israel curb its military action in Lebanon to allow the United States to reach a deal with Iran.
Israel has said it will retain freedom of operations in Lebanon, while Iran has made a full ceasefire there an important component of its demands.
Trump updated Netanyahu on the progress toward a peace deal during a phone call on Sunday, Israel's N12 reported, citing a senior official.
In an interview with the New York Times, Trump called Netanyahu "a very difficult guy" and argued the Israeli leader should thank him for saving Israel from a nuclear-armed Iran.
Before the deal was announced, a senior Iranian official earlier told Reuters that, under the terms of the draft, the United States would agree to release $US25 billion ($NZ42 billion) of frozen Iranian assets.
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.
A senior Iranian official said the draft deal would allow Iran, which denies seeking a nuclear bomb, to dilute its enriched uranium inside the country.
World leaders react
A spokesperson for United Nations Secretary-General Antonio Guterres said: "The Secretary-General welcomes the announcement that the United States and Iran have agreed on a peace deal that provides for an immediate and permanent ceasefire, the reopening of the Strait of Hormuz, as well as a framework for further negotiations. This represents a critical step towards the peaceful settlement of the conflict."
A joint statement from E4 leaders Britain, France, Germany and Italy said: "Iran must never acquire a nuclear weapon. We stand ready to work with the US, Iran and the IAEA to this end."
Australian Prime Minister Anthony Albanese said the federal government welcomed the agreement.
"Australia has long called for de-escalation and an end to the conflict, including in Lebanon. As we have said, the longer this war goes on, the greater the impact will be. Continued restraint and constructive engagement will be essential to prevent further escalation and secure a lasting agreement."
New Zealand's Foreign Minister Winston Peters called it a "pivotal, constructive deal is a step towards reducing tensions and promoting stability in a region that is critical to global economic security... Dialogue and diplomacy remain the most effective means of resolving longstanding issues."
Japanese Prime Minister Sanae Takaichi said: Japan "strongly hopes" that "free and safe navigation through the Strait of Hormuz will be ensured in practice, and that a final agreement on Iran's nuclear issue and other matters will be reached as soon as possible."
