Zoran Zaev, the prime minister of Macedonia, and Alexis Tsipras, the prime minister of Greece, both agreed to the deal on Monday. Macedonia will also amend its constitution to reflect the change as part of the deal.
Previous comments from the Macedonian side have indicated that solutions could involve adding a modifier to the country's official name, such as "Upper" or "Northern" to satisfy Athens, although nationalists in Macedonian have opposed such concessions.
"This historic agreement is testament to many years of patient diplomacy and to the willingness of these two leaders to solve a dispute which has affected the region for too long", said Jens Stoltenberg, Secretary-General of North Atlantic Treaty Organisation.
In a decades-old dispute, Greece wants the former Yugoslav republic to change or modify its name to avoid any claim to the territory and ancient heritage of Greece's region of Macedonia - birthplace of ancient warrior king Alexander the Great.
In September 1995 the neighbours signed an accord in NY opening the way for a normalisation of trade and political ties, but left the name dispute hanging.
But Macedonia clearly liked the name, too, meaning that there's been a massive stand-off for nearly 30 years, which has seen many protests and conflict.
In February, as NPR's Joanna Kakassis reported, more than 140,000 Greeks marched to parliament in Athens as part of a "Macedonia is Greece" rally, chanting that the name "is in our soul". "We have a combined name with a geographic qualifier for all uses", Tsipras said as quoted by the Athens-Macedonian News Agency (AMNA) news agency.
European Union and North Atlantic Treaty Organisation officials, meanwhile, welcomed the announcement from Tsipras and Zaev, calling it a "historic" deal.
Albanian Prime Minister Edi Rama called his Macedonian and Greek counterparts "two progressive leaders" and used their Twitter handles to give their praise, tweeting: "Balkans are today a better place thnx to you both".
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However, Mr Tsipras said, this will be contingent on Macedonia completing the constitutional changes.
Both Albania and Macedonia hope to launch full membership negotiations with the European Union. "I am keeping my fingers crossed. Thanks to you, the impossible is becoming possible", he said.
But Greek Defense Minister Panos Kammenos, whose right-wing Independent Greeks party is Tsipras' junior coalition partner, said he would reject the name agreement in a parliamentary vote.
They said they looked forward to accession negotiations beginning with Skopje in June. The dispute poisoned relations between the two neighbours, and the United Nations appointed a special envoy to mediate. A meeting of the two soon may seal the deal, he said.
Greek Prime Minister Alexis Tsipras. The Greek parliament will also have to agree to the proposal.
Greece has long objected to its northern neighbour being called Macedonia because it has its own northern province of the same name.
The main opposition party in Macedonia, the conservative VMRO-DPMNE, accused Zaev of "capitulating" to Greece.
"This is a bad agreement that is in conflict with the majority of the Greek people", he said.
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