0757 GMT December 14, 2018
Beijing immediately said it hoped for better relations, AFP reported.
There are an estimated 12 million Catholics in China divided between a government-run association whose clergy are chosen by the Communist Party and an unofficial church which swears allegiance to the Vatican.
The Vatican has not had diplomatic relations with Beijing since 1951, two years after the founding of the communist People's Republic.
The preliminary agreement with China "has been agreed following a long process of careful negotiation and foresees the possibility of periodic reviews of its application," the Vatican said in a statement issued as Pope Francis began a visit to the Baltic states.
"It concerns the nomination of Bishops, a question of great importance for the life of the Church, and creates the conditions for greater collaboration at the bilateral level," it said.
Pope Francis meanwhile recognized seven bishops who had been ordained in China without the approval of the Holy See, his office said.
"Pope Francis hopes that, with these decisions, a new process may begin that will allow the wounds of the past to be overcome, leading to the full communion of all Chinese Catholics," a statement said.
Vatican spokesman Greg Burke, speaking in the Lithuanian capital Vilnius, told reporters the aim of the accord "is not political but pastoral, allowing the faithful to have bishops who are in communion with Rome but at the same time recognized by Chinese authorities."
China said the "provisional" agreement was signed in Beijing by Vice Minister of Foreign Affairs Wang Chao and a Vatican delegation headed by Under Secretary for Relations with States Antoine Camilleri, adding that the two sides "will continue to maintain communication and push forward the improvement of bilateral relations".
The Vatican is one of only 17 countries around the world that recognizes Taipei instead of Beijing but Pope Francis has sought to improve ties with China since he took office in 2013.