The deal, signed late on October 16 and ratified he next day, was the culmination of several months of negotiations under the auspices of the United States and the European Union.
Kosovo's Prime Minister Hashim Thaci told a parliament session on October 17 that the agreement aimed to "develop good neighborly relations, stability (and) regional cooperation".
Macedonia's parliament has yet to ratify the agreement.
The area under dispute was used by Albanian guerrillas during Macedonia's rebel Albanian insurgency in 2001. Police say the area is now used by smugglers.
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Macedonia, which last year recognized the breakaway Serbian province as an independent state, said that it would only establish diplomatic relations once the border issue was resolved.
The Kosovo authorities are still in dispute over 1,500 hectares of land on its border with Montenegro. The two sides have yet to start negotiations on the spat.
Kosovo declared independence from Serbia in 2008, almost 10 years after a NATO bombing campaign drove out Serbian forces to stop the killing of Albanians in a counter-insurgency war.
Serbia refuses to recognize Kosovo's declaration of independence.
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