The new deal must still be approved by South Korea's parliament, but it would boost its contribution to 1.03 trillion won (687.68 million pounds) from 960 billion won in 2018. Unlike previous multi-year deals, the term of the new agreement is one year.
"It has been a very long process, but ultimately a very successful process", South Korea's Foreign Minister Kang Kyung-wha told reporters before another official from the foreign ministry initialled the agreement.
While acknowledging lingering domestic criticism of the new deal and the need for parliamentary approval, Kang said the response had "been positive so far".
The president had been harping about South Korea not paying its fair share since the 2016 campaign, making this new agreement a clear victory for his policy of getting other nations to pay more for USA force protection.
U.S. Secretary State Mike Pompeo told Congress in July that North Korea was continuing to produce fuel for nuclear bombs in spite of its pledge to denuclearize, even as he argued - as he has continued to do - that the Trump administration was making progress in talks with Pyongyang.
North Korea remains the No. 1 immediate threat to American forces in the Indo-Pacific Command area of operations, said Adm. Philip Davidson, the U.S. Indo-Pacific Command chief who testified alongside Abrams on Tuesday.
But both sides worked to hammer out an agreement to minimise the impact on South Koreans working on US military bases, and focus on nuclear talks ahead of a second U.S. -North Korea summit, Seoul officials said.
Abrams downplayed the impact of curbing those high-level exercises on US and South Korean troops' combat readiness, saying servicemembers have continued to conduct training exercises together on smaller scales.
They said Trump might use the failed military cost-sharing negotiations as an excuse to pull back some of US troops in South Korea, as a bargaining chip in talks with North Korean leader Kim Jong Un.
Last week, Trump said he would hold his second meeting with Kim in the Vietnamese capital Hanoi on February 27 and 28.
After the June meeting, Trump announced a halt to joint military exercises with South Korea, saying they were expensive and paid for mostly by the United States.
The finding comes ahead of a second planned summit between the North Korean leader and U.S. President Donald Trump. "These capabilities continue to hold the United States, [South Korea] and our regional allies at risk".
"Seoul will cooperate with the national government so that the 2023 summer Olympics become something more than a sports festival - an opportunity to change the fate of the Korean peninsula", said Seoul mayor Park Won-soon.
In talks with the United States, North Korea has been seeking a lifting of punishing US-led sanctions, a formal end to the 1950-53 Korean War, and security guarantees.