The announcement came as the Nuclear Security Summit in Washington concluded. The project will be completed under the auspices of the International Atomic Energy Agency.
Mexican President Felipe Calderon expressed "the strong commitment of Mexico to prevent and suppress nuclear terrorism," the White House said in statement.
By working with the IAEA, the United States and Canada, Calderon said, "(We) definitely contribute to reducing the risks associated with illicit trafficking of nuclear materials."
The three countries said the project also is a key step toward replacing the research reactor with a new low-enriched, uranium-fueled reactor to support Mexico's nuclear energy development.
Converting the reactor's use of highly enriched uranium to low-enriched uranium fuel will help eliminate the remaining highly enriched uranium from Mexico, the White House said.
"I welcome this critical step forward, which is a signal of our strong trilateral partnership, and our shared commitment to nuclear security in North America," U.S. President Barack Obama said.
Canadian Prime Minister Stephen Harper said the project "demonstrates that collective action can deliver concrete results."