The deal gives the Holy See a decisive role in the appointment of all bishops in the country. The Vatican said Pope Francis recognised the legitimacy of the seven remaining state-appointed Chinese bishops.
The Vatican on Saturday signed a landmark agreement giving it a long-desired say in the appointment of bishops in China, though critics labelled the deal a sellout to the Communist government.
The provisional agreement, signed in Beijing by deputy foreign ministers from both sides, was announced as Pope Francis visited Lithuania on a four-day trip to the Baltic countries.
It gives the Holy See a decisive role in the appointment of all bishops in a country whose around 12 million Catholics have been split between an underground Church swearing loyalty to the Vatican and the state-supervised Catholic Patriotic Association.
The Vatican said the accord, a breakthrough after years of negotiations, was "not political but pastoral."
A Holy See statement did not mention Taiwan, which the Vatican recognises diplomatically and which China sees as a renegade province.
But Taiwan said its ties with the Vatican were safe despite the deal.
The Taiwanese foreign ministry said Taipei would not lose its only diplomatic ally in Europe despite the agreement and said it hoped the Holy See would also make sure Catholics on the mainland "receive due protection and not be subject to repression".
However, diplomats have said the accord was a possible precursor to a resumption in diplomatic relations with Beijing after 70 years. Beijing does not allow countries to have diplomatic relations with both China and Taiwan.
Taiwan now has formal relations with only 17 states and the Vatican is the only one in Europe.
The Vatican said the pope hoped "a new process may begin that will allow the wounds of the past to be overcome, leading to the full communion of all Chinese Catholics."
But prospects of such an agreement had divided communities of Catholics across China, some of whom fear greater suppression should the Vatican cede more control to Beijing. Others want to see rapprochement and avoid a potential schism.
"They're giving the flock into the mouths of the wolves. It's an incredible betrayal," said Cardinal Joseph Zen, the feisty, 76-year-old former archbishop of Hong Kong who has led the opposition to the deal.
"The consequences will be tragic and long lasting, not only for the Church in China but for the whole Church because it damages the credibility. Maybe that's why they might keep the agreement secret," Zen said in an interview on Thursday.
Vatican sources have said the deal will not be published and can be reviewed and fine-tuned in the future.
The Vatican said that as part of the deal, Pope Francis had recognised the legitimacy of the seven remaining state-appointed Chinese bishops who had been named without papal approval and had re-admitted them into the Church.
"Today, for the first time all the bishops in China are in communion with the Bishop of Rome (the pope)," Cardinal Pietro Parolin, the Vatican Secretary of State and one of the chief architects of the deal, said in a statement.
Vatican sources have said that a few bishops appointed by Rome will cede their places to bishops who had been appointed by Beijing.
In future, new bishops first will be proposed by members of local Catholic communities together with Chinese authorities. The names of candidates will be sent to the Vatican and the pope will make a final decision, the sources said.