Officials from the two countries held a signing ceremony in Beijing, state news agency Xinhua said.
In a post-election blow to Taiwan, Nauru unexpectedly announced last Monday that it would no longer recognize Taiwan "as a separate country" but "rather as an inalienable part of China's territory".
The decision was seen as major coup for Beijing -- Nauru was one of the few nations to officially recognise Taiwan on a diplomatic basis.
Only 12 states, including the Holy See, now fully recognise Taiwan.
Nauru -- population 12,500 -- is one of the world's smallest countries and lies about 4,000 kilometres (2,500 miles) northeast of Sydney.
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