Forty items from the Holy See's collection of Chinese bronzes, ceramics and paintings will tour four cities including Beijing and Shanghai in March next year, in return for 40 pieces being lent to the Vatican's museums.
Zhu Jiancheng, head of the Chinese government's China Culture Industrial Investment Fund told a Vatican news conference he hoped the agreement would cement friendship, foster mutual trust and "contribute to the normalisation of diplomatic relations".
While China severed ties with the Holy See in 1951, both Pope Francis and his predecessor Pope Benedict XVI have been keen to improve relations.
Diplomatic efforts between Beijing and Vatican City have remained strained over resistance to the Vatican's insistence that the Pope should have authority to name Chinese bishops, a move China views as an infringement on its sovereignty.
There is speculation among academics and human rights campaigners that China's President Xi Jinping will take a tougher stance on religious freedom, following his appointment to a second term as leader of the ruling Communist Party.