Malawi and Tanzania have agreed to work together for the development of the $829m Songwe River Basin Program (SRBDP).
The trans-boundary program will include the development a multipurpose dam, which is expected to supply up to 180MW of hydro power.
It will also provide water for an irrigation scheme covering about 3,000 hectares in each of the countries and control floods in the densely populated lower part of the basin.
The program is being supported by the African Water Facility and the NEPAD Infrastructure Project Preparation Facility (IPPF), both hosted by the African Development Bank (AfDB).
The development of the program envisages the use of the public-private partnership (PPPs) approach.
AfDB's resident representative in Malawi Andrew Mwaba said: "This integrated and trans boundary program is in alignment with the current strategic priorities of the Bank, the High 5s and builds the resilience of local communities to the effects of climate change."