The deal also seeks to strengthen economic ties while allowing for the free movement of people between the two countries.
Ethiopia’s Foreign Affairs ministry said the agreement would enable the two countries to take a common position on regional security affairs.
Among the issues to be prioritised are Somalia, South Sudan and Eritrea.
According to the documents agreed to in the Ugandan capital of Kampala on July 22, a joint ministerial team to oversee the progress of the deal will be established.
“Soon, we will form our joint ministerial committee to follow up on the bilateral and security agreements,” Mr Dina Mufti, the Ethiopian Foreign Affairs ministry spokesman said.
Mr Mufti said the fact that Ethiopia and Uganda are involved in Somalia under the African Union’s mandate demonstrates their common strategic interest in the region.
Sources who spoke on condition of anonymity said that after the July 11, 2010 Kampala bombings, the two countries carried out a joint undercover operation.
Ethiopia accuses Eritrea of destabilising the region, including arming militant group al-Shabaab, which claimed responsibility for the Kampala bombings.
Uganda, along with Burundi, deployed its troops in Somalia to support the Somali Transitional Government after Ethiopia ended its two-year occupation in the Horn of Africa country.