Ethiopia, Egypt and Sudan have agreed to resume talks on the Grand Renaissance Dam reservoir on the Blue Nile after a virtual summit.
The project has been a source of enormous diplomatic tensions since its construction began in Ethiopia in 2011.
Ethiopia sees the hydropower project as crucial for its economic growth and a vital source of energy.
But Egypt and Sudan, which are downstream, fear the large dam will significantly reduce their access to water.
Years of tense negotiations failed to reach a consensus on how and when to fill the reservoir and how much water it should release.
If it becomes operational, the dam will generate 6,000 megawatts, making it the largest hydroelectric dam in Africa. It will provide electricity to some 65 million Ethiopians, who currently lack a regular supply of electricity.
The agreement to resume talks was reached at a meeting of the African Union, chaired by South African President Cyril Ramaphosa.
In a statement, Ethiopian leader Abiy Ahmed hailed the progress, adding that the $ 4bn (£ 3bn) dam was already “overtaking” due to rains of the past two weeks.
Ethiopia had always said it would fill the roadblock in July, while Egypt had warned it to delay further talks.
In a statement, the Egyptian presidency said that future negotiations will focus on “developing a binding legal agreement on the rules for filling and operating” the dam.