Secretary of State Condoleezza Rice and her UAE counterpart Abdullah bin Zayed al-Nayhan signed the document laying out what the US called "the legal framework" for civil nuclear cooperation under international controls.
"We applaud the UAE's commitment to the highest standards of safety, security and non-proliferation in its pursuit of nuclear power," Rice said during the signing ceremony with Sheikh Abdullah.
"This is a powerful and timely model for the UAE and the region," the chief US diplomat said.
Looking over its shoulder at Iran on the other side of the Gulf, the outgoing administration of President George W. Bush has also pursued nuclear cooperation accords with Saudi Arabia, Jordan and Bahrain.
"The UAE's approach to development of civil nuclear energy stands in direct contrast to Iran's pursuit of nuclear capabilities incompatible with IAEA and UN Security Council resolutions," the State Department said.
The IAEA is the International Atomic Energy Agency, the Vienna-based UN nuclear watchdog.
Under pressure from the United States and international partners, the UN Security Council has imposed three sets of sanctions on Iran for its refusal to stop enriching uranium.
Washington suspects Iran aims to build a bomb through its enrichment process — a charge denied by Tehran which says its goal is the peaceful use of nuclear energy.
As part of the deal, both sides said, the UAE has renounced plans to enrich and reprocess uranium or other fuel and will instead obtain fuel from reliable international suppliers.
The State Department added that the United States would have grounds to scrap the agreement if the UAE reneges on its commitment not to engage in enrichment or reprocessing activities, the State Department said.
It said the UAE is party to international efforts to check the spread of nuclear weapons know-how via the Proliferation Security Initiative, the Global Initiative to Combat Nuclear Terrorism and DOE's Megaports Initiative.
Sheikh Abdullah said "this very important agreement" takes cooperation between the two countries to a new level.
"The UAE has been quite transparent about its nuclear peaceful needs," he added.
"We are a country that's very, very rich in oil and gas, but we do look forward that we have a nuclear peaceful program that could sustain our future needs," Sheikh Abdullah said.
Rice said the agreement comes in the context of efforts by the Bush administration to promote nuclear energy as a way to reduce the carbon emissions that cause climate change.
An administration official said the deal must now be submitted to both Houses of Congress for review and may be brought into force following a 90-day congressional review.
The UAE is sensitive to congressional reaction after its state-owned company DP World had to cancel plans in 2006 to buy US port holdings from British P&O due to stiff opposition from American lawmakers.
The Wall Street Journal reported late last year that the UAE has already signed agreements with two US engineering companies, Thorium Power Ltd and CH2M Hill, to help with developing nuclear power plants.
And the country has also recruited a former official from the US Nuclear Regulatory Commission to help run its own atomic regulatory agency, it said.
