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The 24-year-old NAFTA, which President Donald Trump railed against as a disaster, will be replaced by the USMCA — the United States-Mexico-Canada Agreement.
Trump tweeted his approval Monday morning for what he called a "wonderful" trilateral agreement.
In a joint statement, U.S. Trade Representative Robert Lighthizer and Canadian Foreign Affairs Minister Chrystia Freeland said the agreement "will strengthen the middle class, and create good, well-paying jobs and new opportunities for the nearly half billion people who call North America home."
The plan is for the leaders of the three North American countries to sign before the end of November, after which it would be submitted to Congress.
The negotiations between American and Canadian officials involved offering more market access to U.S. dairy farmers, as well as Canada agreeing to an arrangement effectively capping automobile exports to the United States.
A senior Trump administration official said the deal will "re-balance our trade relationship with Mexico and Canada, " highlighting new rules on the origin of autos, and market access to Canada's dairy sector.
The deal will also modernize what was covered by NAFTA by adding provisions on digital trade and intellectual property, the administration official said.
A U.S. official also pointed to the prospect of enforcing the agreement, calling it "one of the most enforceable trade agreements we've ever had."
"This is going to be real, and it's going to change people's lives, and it's going to make the U.S. economy stronger and better," the official said.
The trade pact will come up for review every six years, which will give the U.S. a "significant new form of leverage" to make sure the arrangement is to its liking, according to the senior American official.
"It's a good day for Canada," Prime Minister Justin Trudeau said.
"We celebrate a trilateral deal. The door closes on trade fragmentation in the region," Jesus Seade, trade negotiator for Mexico's incoming president, said via Twitter.
The issue of enforcement was front and center in a statement from Senate Finance Committee Ranking Member Sen. Ron Wyden, D-Ore.
"As I've said many times, NAFTA has long needed a serious overhaul," he said. "The crucial test for a new NAFTA, or any new trade agreement, is whether it is enforceable, particularly with respect to promises to protect worker rights and the environment. Americans are sick of hearing speeches about the benefits of new trade agreements when the agreements in place aren't even enforced and their opportunities don't materialize."
Negotiators were racing to meet a U.S.-imposed Sept. 30 deadline to reach an agreement with Canada as they tried to roll out a new North American trade pact.
Canada, America's second-largest trading partner, was left out when the U.S. and Mexico reached a preliminary deal in late August to revamp NAFTA. Canada was expected to join the talks after that, and the two sides have sparred over dairy products.
Lighthizer said he was prepared to move ahead with just Mexico, but some in Congress, which has to approve a deal, were against leaving Canada behind.
Canadian Prime Minister Justin Trudeau had earlier told reporters in New York during U.N. week that they will keep working on a "broad range of alternatives."
—CNBC's Ylan Mui and Stephanie Dhue, The Associated Press and Reuters contributed to this report.
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