After years of bitter wrangling, Australia and East Timor have signed a "historic" treaty at the United Nations aimed at resolving a boundary dispute that also carves up $56 billion in potential revenue from oil and gas reserves in the Timor Sea.

East Timor, one of the world's most impoverished nations, will reap between 70 to 80 per cent of the revenue from the Greater Sunrise fields under the agreement.

The ceremony at the United Nations on Tuesday involved Foreign Minister Julie Bishop, East Timor deputy minister for the Delimitation of Borders Agio Pereira and UN Secretary-General Antonio Guterres.

"This is an historic day for both our nations," Ms Bishop told the ceremony.

"We recognise that it is a particularly important day for Timor-Leste and another step forward in Timor's journey as a sovereign nation."

East Timorese Minister of State Agio Pereira shakes hands with Australian Foreign Minister Julie Bishop after they signed a treaty during a ceremony at United Nations headquarters, Tuesday, March 6, 2018. Australia and East Timor signed a treaty that draws the first-ever maritime border between the neighbors, resolving years of bitter wrangling with a deal that carves up billions of dollars of oil and gas riches that lie beneath the Timor Sea. (AP Photo/Seth Wenig)

Animosity again flared in the days leading up to the signing when East Timor's chief negotiator Xanana Gusmao accused Australia of colluding with oil companies to ensure Greater Sunrise oil and gas gets piped to Darwin instead of East Timor.

But the two nations were full of praise for each on Tuesday. The signing also marked the first time maritime differences were resolved under the UN Convention on the Law of the Sea.

"The agreement divides the revenues from the development of that project either 80/20 or 70/30 in Timor's favour depending upon circumstances surrounding the development," Ms Bishop told reporters.

"So clearly, should the development of Greater Sunrise proceed through the work of joint venture partners, then substantial benefits will flow to Timor."

This undated map provided by the Australian Department of Foreign Affairs and Trade shows Australia's maritime arrangements with East Timor. Australia and East Timor will sign a treaty that draws the first-ver maritime border between the neighbors, resolving years of bitter wrangling with a deal that carves up billions of dollars of oil and gas riches that lie beneath the Timor Sea. Australia and its impoverished half-island neighbor will ink the agreement at the United Nations in New York on Tuesday, March 5, 2018, putting to rest a dispute that has dominated and soured relations since 2002 when East Timor emerged as a fledgling sovereign nation independent of Indonesia.(Department of Foreign Affairs and Trade via AP)

The foreign minister said she looked forward to the release of the UN Conciliation Commission's independent report and analysis of the options to develop Greater Sunrise.

Mr Pereira said the negotiations between the nations were "tough".

"This treaty establishes a special regime for the Greater Sunrise gas field and a pathway to the development of the resource," Mr Pereira told the ceremony.

"The conclusion of this treaty clarifies the rights and responsibilities of Timor Leste and Australia with regard to the resources and activities that fall within our respective sovereign territories."

United Nations Secretary-General Antonio Guterres, center, poses for a picture with East Timor's Deputy Minister of the Prime Minister for the Delimitation of Borders Agio Pereira and Australian Foreign Minister Julie Bishop after they signed a treaty during a ceremony at United Nations headquarters, Tuesday, March 6, 2018. Australia and East Timor signed a treaty that draws the first-ever maritime border between the neighbors, resolving years of bitter wrangling with a deal that carves up billions of dollars of oil and gas riches that lie beneath the Timor Sea. (AP Photo/Seth Wenig)

Mr Guterres, a longtime supporter of East Timor and its independence, hailed the signing as an historic breakthrough for the UN.

"This ceremony demonstrates the strength of international law and the effectiveness of resolving disputes through peaceful means," he said.

Ms Bishop said Australia, which also has a treaty with Indonesia, had kept Indonesia up to date with the East Timor negotiations.

Indonesian Foreign Minister Retno Lestari Priansari Marsudi had congratulated Australia and East Timor on the deal, Ms Bishop said.

"The Australia-Indonesia treaty will remain and it does open the way for Timor Leste and Indonesia to negotiate the changing boundaries," Ms Bishop said.

"That will have an automatic flow on effect of adapting the eastern and western boundaries of the Australian-Timor Leste treaty we signed today."