The pipeline will be designed to carry natural gas from the BP-controlled Shah Deniz field in the Azeri waters of the Caspian Sea through Turkish territory.
In February, a consortium controlling Shah Deniz chose the Trans-Adriatic Pipeline as a possible route for European natural gas consumers.
TAP Managing Director Kjetil Tungland said the TANAP agreement was a positive step in efforts to diversify the European energy sector.
"As the Shah Deniz consortium's chosen project for the southern route into Europe, via Greece, Albania and Italy, we welcome the contribution that this development brings to opening up the Southern Gas Corridor," he said in a statement.
TAP is expected to carry as much as 353 billion cubic feet of natural gas per year.