OPEC has agreed to cap the group's total production at 32.5 million barrels per day, down from 33.64 million in October.
OPEC agreed to cut oil production for the first time since 2008 on Wednesday, pushing up crude prices by around 10 percent.
Member countries of the Organization of the Petroleum Exporting Countries reached the deal during a meeting in Vienna.
"I think it is a good day for the oil markets, it is a good day for the industry and... it should be a good day for the global economy. I think it will be a boost to global economic growth," Saudi Energy Minister Khalid al-Falih told reporters after the decision.
OPEC agreed to cap the group's total production at 32.5 million barrels per day (bpd), down from 33.64 million in October. Non-OPEC countries like Russia are also part of the deal.
Saudi Arabia will make the biggest cut, reducing output by almost 0.5 million bpd to 10.06 million bpd. Its Gulf OPEC allies - the United Arab Emirates, Kuwait and Qatar - would cut by a total 0.3 million bpd.
However, Iran was allowed to boost production slightly from its October level, having long argued it needs to regain market share lost under Western sanctions. Saudi Arabia dropped its earlier demand on arch-rival Iran to slash output.
"OPEC has proved to the sceptics that it is not dead. The move will speed up market rebalancing and erosion of the global oil glut," said OPEC watcher Amrita Sen from consultancy Energy Aspects.
Fast-growing producer Iraq also agreed to curtail its booming output, while non-OPEC Russia will join output cuts for the first time in 15 years to help the OPEC prop up oil prices.
The cut did not come without a casualty. Indonesia, the producer group's only East Asian member, said it would suspend its membership after rejoining only this year as it was not willing to comply with the output cuts sought.
Following news of the deal, the price for Brent crude futures, the international benchmark for oil prices, surged to settle up around 10 percent. They eased slightly in early Asian trading on concerns that other producers, especially US shale drillers, could fill any gap.
Despite Wednesday's price surge, oil prices are still only at levels last seen in September and October, when plans for a cut were first announced, and are at less than half their levels of mid-2014, when the glut started.