The Former Yugoslav Republic of Macedonia, its official United Nations designation, will change its name to the Republic of Northern Macedonia, but will be known colloquially as Northern Macedonia under the accord.
Greece argued that by calling itself Republic of Macedonia the neighboring country was stating a territorial claim of the Greek northern province, also called Macedonia.
"Macedonia will be called the Republic of Northern Macedonia [Severna Makedonija]", Zoran Zaev, the country's prime minister, announced Tuesday.
Macedonian Prime Minister Zoran Zeav addresses the media during a news conference in the Government building in Skopje, Macedonia, June 12, 2018.
Announcing the agreement reached with neighbouring Greece over the change of name, Macedonian Prime Minister Zoran Zaev said resolving the long-standing issue would open his country's access to North Atlantic Treaty Organisation and the European Union.
Skopje hopes that with a solution in hand, North Atlantic Treaty Organisation will extend an invitation to join and the European Union will allow the start of Macedonian accession talks as early as this summer.
"This historic agreement is testament to many years of patient diplomacy and to the willingness of these two leaders to solve a dispute which has affected the region for too long", said Jens Stoltenberg, Secretary-General of North Atlantic Treaty Organisation.
United Nations mediator Matthew Nimetz welcomed the news, expressing confidence that the agreement will strengthen relations between the two Balkan neighbors "and especially between their people".
In 2001, Greece, the only country in the region with EU, NATO and eurozone membership, expressed support for Skopje, faced by an armed conflict with ethnic Albanian rebels.
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"The European Union perspective of the Western Balkans ... remains the most powerful stabilising force for the region", they added.
The name deal must still be ratified by the Macedonian and Greek parliaments and by a Macedonian referendum, expected in September. The short explanation is that it has something to do with ending a bitter 27-year dispute with Greece, but bear with us if you can.
Previous administrations in Macedonia's capital, Skopje, resisted demands to change or modify the name.
The deal would also require Macedonia revising its constitution.
European Council president Donald Tusk tweeted his "sincere congratulations" to Mr Tsipras and Mr Zaev.
Many Greeks felt their northern neighbour was trying to hijack Greece's ancient cultural heritage. "I am keeping my fingers crossed".
Hristijan Mickoski, president of Macedonia's opposition party VMRO-DPMNE, said: "Today is a hard day for the Republic of Macedonia".
"We are proud that this historic agreement was reached while two progressive governments are running both of the countries", PES president Sergei Stanishev said.
Tsipras said in a televised statement that Macedonia's name change would allow a clear distinction between Greece's province of Macedonia and the neighbouring country.