France has initialled a deal to build a high-speed rail link between the cities of Tangiers and Marrakech in Morocco.
President Sarkozy got a warm welcome from King Mohammed VI
President Nicolas Sarkozy, who is on a three-day visit to Morocco, has also signed a deal to sell a French frigate to the Moroccan navy.
He was warmly welcomed by King Mohammed VI at the start of his first visit to the country since being elected in May.
France is Morocco's main export destination, and its main supplier of goods and foreign investment.
The tentative deal to build the rail link, led by the French group Alstom, is worth 2bn euros (£1.4bn).
The first section, 200km (125 miles) from Tangiers to Kenitra, would be operational in 2013.
Ms Dati, who is of Moroccan origin, is accompanying Mr Sarkozy
France will also sell a Fremm class frigate to the Moroccan navy and will modernise 25 of its Puma helicopters and 140 armoured vehicles, a French official said.
However, in a setback to French hopes, Morocco decided against buying 18 French Rafale fighters, opting instead for cheaper US-built F16 jets.
On Tuesday, Mr Sarkozy will address the Moroccan parliament in Rabat, before travelling to Tangiers to give a speech about his ideas for a union of Mediterranean countries.
He is accompanied on his visit by his Justice Minister, Rachida Dati, who is of Moroccan origin, and 70 French business leaders.