BEIRUT -- Lebanon's President Michel Aoun said Thursday that the cash-strapped country has approved a U.S.-mediated maritime border deal with Israel.

Lebanon and Israel both claim around 860 square kilometres (330 square miles) of the Mediterranean Sea that are home to offshore gas fields.

The agreement to demarcate the maritime border comes after months of talks mediated by senior U.S. official Amos Hochstein, and would mark a major breakthrough in relations between the two countries, which have formally been at war since Israel's creation in 1948.

鈥淭his indirect agreement responds to Lebanese demands and maintains all our rights,鈥� Aoun said in a televised speech.

Aoun made the announcement hours after meeting with caretaker Prime Minister Najib Mikati and Speaker Nabih Berri, who had received copies of Hochstein's latest iteration of the agreement earlier this week.

U.S. President Joe Biden on Tuesday said that both countries agreed to 鈥渇ormally鈥� end their maritime border dispute, and that their leaders both told him they were ready to take next steps.

Israel's Cabinet on Wednesday voted in favor of the U.S.-brokered deal by a 鈥渓arge majority鈥� of its ministers. The agreement will be forwarded to the Knesset, or parliament, for a two-week review period before a final Cabinet vote.

Lebanon hopes that demarcating maritime borders will pave the way for gas exploration to help lift it out of its crippling economic crisis.

鈥淚 hope the end of these negotiations is the promising start to placing the cornerstone for the economic growth that Lebanon needs through extracting oil and gas,鈥� Aoun said. 鈥淲hich would add stability, security, and development that our nation Lebanon needs.鈥�

Israel meanwhile also hopes to exploit gas reserves and hopes the deal will reduce the risk of war with Lebanon's Iran-backed militant group Hezbollah.

The agreement stipulates that the disputed waters would be divided along a line straddling the 鈥淨ana鈥� natural gas field. Gas production would be based on the Lebanese side, but Israel would be compensated for gas extracted from its side of the line.

Lebanon has been working with French energy giant Total on preparations for exploring the field.