Syrian President Bashar al-Assad has authorised Iraqi forces to attack ISIL targets inside his country without waiting for permission from authorities in Damascus, Syrian state news agency SANA said.
The development comes as the two neighbours, who are also both allied with Iran, work to coordinate their fight against rival groups ahead of a planned US military withdrawal from Syria.
The Islamic State of Iraq and the Levant group declared a caliphate in 2014 after seizing large swaths of Syria and Iraq, establishing its de facto capital in the Syrian city of Raqqa.
However, the group has lost all of its strongholds and the vast majority of the territory it controlled since then, although thousands of its armed members are thought to remain in war-battered Syria.
Iraqi warplanes and artillery have pounded ISIL positions inside Syria in the past, after getting the green light from Syrian authorities.
The group has been defeated in Iraq but still holds a small area in Syria close to the Iraqi border.
On Saturday, al-Assad received a letter from Iraq's Prime Minister Abdul-Mahdi calling for both countries' coordination in "fighting terrorism", SANA said.
President Donald Trump announced earlier this month that the US will withdraw all of its 2,000 forces in Syria.
The US-backed, Kurdish-led Syrian Democratic Forces, which fought in the forefront of the battle against ISIL, has expressed concerns that the US plans to withdraw forces could lead to the revival of the armed group, saying that they had not been defeated yet in Syria.
The SDF said the fight against the group was at a "decisive" stage that requires even more support from the US-led coalition against it.
Economic deal Separately, in Tehran, Iran and Syria signed on Sunday a long-term strategic and economic agreement as the war winds down in the latter.
Syria's SANA news agency quoted Syrian Minister of Economy and Foreign Trade Mohammed Samer al-Khalil, who signed the agreement, as saying that the deal includes "full cooperation on the financial and banking levels".
Al-Khalil said that "priority in the reconstruction of Syria will be given to Iranian public and private companies," according to SANA's report.
The Syrian government estimates reconstruction of the war-torn country will cost some $200bn and last 15 years.
Iran and Russia have been the main backers of al-Assad's government since the crisis began nearly eight years ago.
The Syrian government has gained control of large parts of the country with the help of Iran and Russia and some Arab countries, including the oil-rich United Arab Emirates, have reopened their embassies in Damascus.