A bus service connecting Pakistan's capital with China's oasis city of Kashgar in the Xinjiang Uyghur autonomous region would be launched from August.
An agreement to this effect was signed by Pakistan's Additional Secretary, Communications Mohammad Abbas and the provincial minister of China's Sinkiang province on Tuesday.
The Gilgit-Kashgar bus service was launched between the two countries last year and is being run successfully.
Arrangements for launching the new bus service will be finalised at a meeting in Islamabad next month. China has also presented a proposal for launching an Urmachi-Islamabad bus service, which will also be discussed in next month's meeting.
The two sides also decided that a goods transport agreement would be implemented from July 1, 2007.
Pakistan also proposed that the economic corridor should be extended to Urmachi. Both sides agreed to increase the number of permits for goods trade between the two countries, media reports on Wednesday.