Nkosazana Dlamini Zuma, chairperson of the African Union Commission, has called for political dialogue between Egypt and Ethiopia over the Nile basin issue, state news agency reported on Friday.
Speaking to reporters in Addis Ababa, Zuma said talks would serve both countries' interests.
On Thursday, Ethiopia's parliament ratified a controversial treaty ensuring its access to Nile water resources, AFP reported.
The deal replaces a colonial-era agreement that granted Egypt and Sudan the majority of water rights, and allows upstream countries to implement irrigation and hydropower projects without first seeking Egypt's approval.
Egypt and Sudan have not signed the Cooperative Framework Agreement (CFA) led by the Nile Basin Initiative, but six upstream nations have.
Ethiopia inked the deal in May 2010, and its ratification by parliament comes amid rising tensions between Addis Ababa and Cairo over Ethiopia's construction of the Grand Renaissance Dam on the Blue Nile.
Egyptian President Mohamed Morsi has warned that "all options are open" over the construction of the dam, but Ethiopia insists it will not go to war with its neighbour, dismissing Morsi's words as "empty and violent rhetoric."
Ethiopia began diverting the Blue Nile last month, paving the way for the construction of the $4.2 billion (3.2 billion euro) Grand Renaissance Dam, set to become Africa's biggest hydroelectric dam when completed.
The Ethiopian foreign ministry issued a statement on Friday saying that the ratification of the CFA, also known as Entebbe agreement, is an "important step towards the equitable use of the Nile waters".
For decades, Egypt held veto rights over all upstream projects, following powers granted by a 1929 colonial-era treaty with Britain.
Egypt's subsequent 1959 deal with Sudan gave the two downstream countries more than 90 percent of the Nile's water.