Ismail Sabri took office last month with a slim parliamentary majority, becoming the third prime minister in as many years, but the country's constitutional monarch has called for him to face a vote of confidence to prove he has majority support in parliament.
Parliament is scheduled to convene from Monday but no date has been set for the confidence vote.
In a joint statement late on Sunday, representatives from the government and the Pakatan Harapan opposition bloc - led by Anwar Ibrahim - said they have agreed to focus on "transformation initiatives and reforms."
"All parties have agreed that this MoU is aimed at returning political stability to the country in order to fight the COVID-19 pandemic and revive the economy through bi-partisan cooperation," they said.
The pact follows Ismail Sabri's offer on Friday to introduce political reforms including new laws to prevent defections and limit the term of a prime minister to 10 years, in a bid to win opposition support for his leadership.
His offer also includes: bipartisan agreement on every bill to be introduced in parliament, input from opposition parties' on a national recovery council and immediate lowering of the minimum voting age from 21 to 18. He also said the opposition leader will be given the same remuneration and privileges as a cabinet minister.
Malaysia has seen political instability since the election defeat in 2018 of the United Malays National Organisation (UMNO), which had governed for more than 60 years since independence, due to widespread corruption allegations.
Two governments have collapsed since then and Ismail Sabri's appointment restored the premiership role to UMNO.