Egypt, Sudan and Ethiopia have agreed to complete an initial technical study of the Renaissance Dam.
Officials from the three countries are holding talks regarding the controversial project in in the Ethiopian capital Addis Ababa today.
"They instructed their water and energy ministers to draw up in one month a report that thrashes out ways to resolve all outstanding issues regarding the dam," an Ethiopian official attending the talks said.
In the meeting, the leaders agreed to hold annual meetings over the region and to set up a fund to build infrastructure projects, including a railway line linking the three countries.
The Renaissance Dam "was never intended to harm any country but to fulfil vital electricity needs and enhance development cooperation in the region", Hailemariam Desalegn , Ethiopian prime minister, said.
The construction of the dam began in 2011. It is located 15 kilometres east of the Ethiopia-Sudan border. The dam has been the centre of a row between Egypt and Ethiopia with Cairo accusing Addis Ababa of endangering its share of Nile water by building the huge reservoir in Ethiopia's Benishangul-Gumuz region, near the Sudanese border.
The dam is expected to have a reservoir of about 70 billion cubic metres which Ethiopia hopes will solve the country's power shortage problems. When built, it will become Africa's biggest hydro-electric power station, producing up to 6,000 megawatts of electricity – at a cost of $4.2 billion.
In early January, the United Arab Emirates-backed Egyptian forces arrived in Eritrea, adding to the tensions.