The US retailer will market, distribute and, in some cases, license Ethiopia's range of high-quality coffee brands.
A row over the recognition and use of trademarks for its coffee has stymied co-operation between the two sides.
But it is hoped the deal will act as a catalyst to raise prices and improve the livelihoods of Ethiopian farmers.
Although Ethiopian coffees command a premium price in foreign markets, particularly the US, farmers who grow the beans often live in extreme poverty.
Hopes of an alliance between Starbucks and Ethiopia receded last year when the retailer objected to a plan to license rights to coffee brands in countries where they were not registered as trademarks.
Starbucks was also accused of opposing potentially lucrative trademark applications in the US.
But the new agreement acknowledges Ethiopian ownership of popular coffee designations such as Yirgacheffe, Harrar and Sidamo, regardless of whether they are registered or not.
It will also allow Starbucks to use coffee types in certain markets under agreed conditions.
Ethiopian farmers will not receive royalty payments from the deal, but it is hoped that more effective distribution and marketing will help boost demand and, in time, lift prices.
"This agreement marks an important milestone in our efforts to promote and protect Ethiopia's speciality coffee designations," said Getachew Mengistie, director general of the Ethiopian Intellectual Property Office.
"Having the commitment and support of Starbucks will help enhance the quality of Ethiopian fine coffees and improve the income of farmers and traders."
Ethiopian coffees have been trademarked in the US, Japan, Canada and Europe, while applications are pending in China, Brazil and India.
But fair-trade campaigners argue that this has done little so far to reward Ethiopian farmers, some of whom receive only $300 a year for their crop.
Ethiopian officials said the ultimate aim of the agreement was to try to boost prices, which for Starbucks purchases averaged $1.42 per pound last year.
Starbucks said the accord was far more comprehensive than previous agreements.
"We are extremely pleased that this agreement supports both the Ethiopian speciality coffee industry and the farmers and their communities that produce these fine coffees, while allowing us to bring them to our customers," said chairman Howard Schultz.
Ethiopia is Africa's largest coffee producer, ahead of Uganda and the Ivory Coast, and coffee is its largest source of foreign exchange.
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