Sudan and South Sudan signed a "treaty of non-aggression" on their disputed border Friday in Addis Ababa, where African Union-led negotiations between the two sides are being held.

"The two countries agree to non-aggression and cooperation," chief negotiator Thabo Mbeki, the former president of South Africa, told reporters.

The deal was signed by the head of South Sudan's intelligence bureau, Thomas Douth, and Sudan's director of national intelligence and security, Mohammed Atta.

According to the pact, the two sides agreed to "respect for each other's sovereignty and territorial integrity" and to "refrain from launching any attack, including bombardment".

Border tensions have mounted since South Sudan split from Sudan in July, becoming the world's newest nation.

Negotiations between the two former civil war foes have been marred by eruptions of violence along the border, including in the contested Abyei and Blue Nile states.

Friday's agreement will also establish a monitoring mechanism where either side can lodge complaints if border disputes erupt.

"In the event that there are complaints or allegations from either side... then they should be appointed to the joint mechanism," Mbeki added.

Mbeki urged both sides to ensure Friday's peace deal is adhered to.

"We are very serious... it is the responsibility of both sides to act now," he said.

UN Secretary General Ban Ki-moon warned Friday that tensions between the two nations could escalate if outstanding issues are not resolved, urging peace.

"The moment has come for the leaders of both countries to make the necessary compromises... that will guarantee a peaceful and prosperous future," he said in a statement.

Talks are expected to continue in the Ethiopian capital Saturday, with a focus on outstanding oil revenue and pipeline fee issues.

South Sudan took three quarters of Sudan's oil when it gained independence, but all pipeline and export facilities are controlled by the north. Last month, the South halted oil production after Juba accused Khartoum of stealing $815 million worth of crude oil.