India's national security adviser said it was "one of the most significant documents" signed by the two countries.
The agreement was sealed as Indian premier Manmohan Singh met visiting Chinese counterpart Wen Jiabao.
The world's two most populous countries fought a bitter war over their largely unmarked border in 1962.
India's National Security Adviser MK Narayanan told Indian television that Indian and Chinese officials had worked out a roadmap for resolving the disputed 3,550km (2,200 mile) border.
"It shows a lot of give and take on both sides," he said.
| || “ We are going to put in place a bridge of friendship linking our two countries, a bridge that will lead both of us to the future ” — Wen Jiabao |
"We are very hopeful that this document will be the starting point of a major process in the settlement of the boundary dispute between India and China."
The joint statement by the two countries did not go into specifics on the issue, talking of "political parameters" and "guiding principles".
However, China has now formally given up its claim to the state of Sikkim.
The joint statement refers to "the Sikkim State of the Republic of India".
Until now, China had never recognised India's 1975 annexation of Sikkim.
On the remaining issues of contention, the statement said "special representatives" would negotiate the issues, adding: "Both sides are convinced that an early settlement of the boundary question will advance the basic interests of the two countries."
Both sides have previously claimed the other is occupying parts of its land.
While India has accused China of occupying territory in Kashmir, Beijing has laid claim to territory in the north-east Indian state of Arunachal Pradesh.
However, analysts say the border differences have been played down in recent times as China and India developed a blossoming economic relationship.
In addition to the border plans, Mr Wen said the two countries had set a target of increasing annual trade to $30bn by 2010.
China also reiterated its support for India to be given a permanent seat on the UN Security Council.
On Sunday, Mr Wen visited Bangalore, where he urged closer ties in the fields of science and technology.
"If India and China co-operate in the IT industry, we will be able to lead the world... and it will signify the coming of the Asian century of the IT industry," Mr Wen said.
The Chinese premier is on the final leg of his first South Asian tour since taking office last March.
Published: 2005/04/11 14:54:40 GMT
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