Western officials say the UN talks are the only hope of halting fighting among factions allied to the oil producer's two governments and parliaments vying for power four years after the ousting of Muammar Gaddafi.
An armed alliance known as Libya Dawn took over the capital Tripoli and declared its own government and parliament a year ago, driving out the internationally recognised premier and deepening anarchy and division in the North African country.
The United Nations, wrapping up months of negotiations, had invited the warring factions to the Moroccan coastal town of Skhirat to sign an initial power-sharing agreement.
"This agreement will bring a step, an important step in the road of peace in Libya," UN Special Envoy Bernardino Leon told the ceremony attended by Arab and European officials.