BP and its partner China's CNPC were the only winners in Iraq's first international oil auction in over 30 years in June for development rights for the 17.8 billion-barrel Rumaila field.
Government spokesman Ali al-Dabbagh told The Associated Press Saturday the Cabinet approved the deal Friday. He did not provide further details.
BP will hold a 38 percent stake in the venture, while CNPC will have a 37 percent share. Iraq's State Oil Marketing Organization will control the rest.
Iraq has the world's third-largest known oil reserves and has been trying to boost production by welcoming foreign investment.