Premier Li Keqiang and Malaysian Prime Minister Najib Razak reached the agreement during an official meeting on Monday.
Li suggested harnessing China's advanced construction technology and low costs with Malaysia's surging demand for infrastructure construction, according to a media release issued after the meeting.
The two countries will also explore the potential for cooperation on building a rail line in southern Malaysia and setting up an alliance covering Chinese and Malaysian ports.
These moves will help to "beef up regional connectivity and boost bilateral trade", the media release said.
Najib told Li he expects the rail projects to be started as soon as possible.
The high-speed line linking Kuala Lumpur and Singapore is expected to cost more than $10 billion and cut the traveling time between the cities to just 90 minutes from about eight hours.
Railway construction companies from China, Japan, Germany, France and South Korea have expressed an interest in the project.
Najib also said relations between China and Malaysia have entered their best period to date and he welcomed Chinese enterprises to invest in his country.
He said Malaysia will issue digital visas to attract more Chinese visitors.
Xiamen University's Malaysia campus will also start enrolling students next year. This is the first overseas campus approved by the Chinese government to be set up by a Chinese university.
The two premiers also agreed to deepen cooperation in areas including space activities and science.
They witnessed the signing of cooperation documents in fields including ports, production capacity and market access.
Suhaimi Ilias, chief economist at Malaysia's bank Maybank, said China's direct investment in the country is rising.
He said China could make Malaysia its base for trade with the rest of the Association of Southeast Asian Nations member states.
It could do so by taking advantage of Malaysia's strategic position on global trade and maritime routes.