External Affairs Minister S M Krishna and his Chinese counterpart Yang Jiechi signed the agreement after their first round of talks here.
This is the first time in recent years that India has established a dedicated hotline facility with any country.
Under the agreement, dedicated phone lines will be set up in the Prime Minister's office of the two countries.
Speaking to reporters, Krishna said, "This has been one of the highlights of my visit and it is fitting that the two countries were able to do it during the celebrations of 60th year of establishment of diplomatic relations."
When asked whether the issue of stapled visas were taken up during the meeting with Yang, Krishna said, "All issues concerning bilateral ties were discussed."
The Minister said the discussions between him and Yang were "purposeful and indeed satisfying."
"We want to have continued, sustained and cordial relations with China. That has been one of the priorities of India's foreign policy. That purpose has been subserved by my visit to Beijing," he added.