The ceremony held in the Saudi capital was attended by Crown Prince of Saudi Arabia Mohammad Bin Salman, who sponsored the talks, the Crown Prince of the Emirate of Abu Dhabi Mohamed bin Zayed al Nahyan, and Yemeni President Abdo Rabu Mansur Hadi, Efe news reported.
The agreement "represents a step toward a political solution and ending the war in Yemen," Bin Salman said in the ceremony before signing the agreement.
Supporting Yemen, where his country has led a military coalition since 2015, and the legitimate government, is Saudi Arabia's "main concern," he added.
"We have achieved a lot for security in Yemen and the region and we will continue seeking to achieve Yemeni people's aspirations," he added.
Bin Salman praised the role United Arab Emirates has played, adding it has made "a lot of sacrifices" backing Saudi Arabia and the coalition.
The southern separatists are supported by the UAE, which is also a key part of the Arab coalition.
The UAE has started to withdraw its troops from southern Yemen over the past few weeks.
In August, the southern separatists temporarily seized control of Aden, where the internationally-recognized government is based, after clashes with pro-government troops, something Hadi considered as "coup d'etat against the state's legitimate institutions."
The government of Hadi was expelled from the capital Sana'a by the Houthi rebels after the conflict broke out in 2014 between the two sides.
The United Nations Special Envoy for Yemen, Martin Griffiths, congratulated the Yemeni parties in the agreement, showing gratitude to Saudi Arabia for its role in achieving the deal.
"The signing of this agreement is an important step for our collective efforts to advance a peaceful settlement to the conflict in Yemen. Listening to southern stakeholders is important to the political efforts to achieve peace in the country," he said in a statement.
"I hope that this agreement will strengthen stability in Aden and the surrounding governorates," the statement ran.
( With inputs from IANS )