Under the agreement, Afghan trucks will be allowed to take goods up to Wagah and the two ports, from where Indian importers will receive consignments and carry them further using their own sources of transportation.
However, Pakistan will not allow the Afghan trucks to carry back Indian goods through its territory.
Pakistan's Commerce Minister Makhdoom Amin Fahim and his Afghan counterpart Anwarul Haq Ahadi signed the agreement in Kabul on Thursday.
The cabinets of Pakistan and Afghanistan recently approved the new agreement. The new agreement will replaced one signed by the two countries in the mid-1960s.
President Asif Ali Zardari today hailed the signing of the new agreement, saying the pact will boost trade and contribute to peace and stability in the region.
In a message felicitating his Afghan counterpart Hamid Karzai on the signing of the Pakistan-Afghanistan Transit Trade Agreement yesterday, Zardari said the pact would lead to a "win-win situation for the two countries".
"The agreement was a most welcome development for the region that would not only boost trade of the two countries but would also contribute to peace and stability by further strengthening the relations between the two countries," Zardari said.
Economic development is the key to peace and stability in the region and this agreement will promote development by creating new vistas of opportunities for people, especially for those who have been the worst victims of militancy during recent years, he said.
The pact will give Afghan goods access to India through the Wagah land border route and Karachi and Qasim ports.
Zardari said every vehicle plying under this agreement will contribute to "enhancing mutual trust and thereby strengthen elements of peace through socio-economic development of the region".
He expressed the hope that traders and the business communities of the two countries will take maximum advantage of the pact.
US Special Representative for Afghanistan and Pakistan Richard Holbrooke and President Karzai witnessed the signing.