Sudanese President Omar Al-Bashir has announced his support for Ethiopia's Renaissance dam during a meeting with the country's Prime Minister Hailemariam Desalegn.
The pair signed 14 new agreements, covering security, a free trade zone, investment and electricity.
Ethiopia and Sudan also agreed to build a railway line linking the two countries to enhance trade and economic relations.
"Backing the dam project is not a political stance, but rather a belief in its benefits for all Nile Basin states," Al-Bashir said following the meeting in Khartoum on Wednesday.
In a related context, Sudan expressed its appreciation for the role played by Desalegn's government, who is also chairman of the African Union (AU), towards the arrest warrants issued against Al-Bashir by the International Criminal Court (ICC).
The talks came days ahead of a tripartite meeting on the dam between Egypt, Sudan and Ethiopia, which Al-Bashir said would seek to "serve the interests" of all parties.
In June, Ethiopia's parliament ratified a controversial treaty to ensure its access to Nile water resources. It allows upstream countries to implement irrigation and hydropower projects without first seeking Egypt's approval. The deal replaces a colonial-era agreement that granted Egypt and Sudan the majority of water rights.
Egypt and Sudan have not signed the (CFA) led by the Nile Basin Initiative, but six upstream nations have.
Ethiopia inked the deal in May 2010, and its ratification by parliament came amid rising tensions between Addis Ababa and Cairo over Ethiopia's construction of the Grand Renaissance dam on the Blue Nile.
Ethiopia began diverting the Blue Nile in May, paving the way for the construction of the $4.2 billion (3.2 billion euro) dam, set to become Africa's biggest hydroelectric dam when completed.
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.