The agreement to go on with the Trans-Anatolian gas pipeline (TANAP) was signed in Turkey's biggest city Istanbul.
Six Turkish companies are to supply most (80%) of the steel pipes needed for the 1800-km-long pipeline, Hürriyet Daily News reports.
The remainder will be provided by German-based Chinese Baosteel Europe.
At a special ceremony Turkish Prime Minister Davutoglu described TANAP as "not only an energy project, but also a peace project".
Gas from Azerbaijan will be carried out to Europe via Turkey as the EU is exploring options to reduce its dependence on Russian resources.
The pipeline is expected to go along Turkey's borders with Bulgaria and Greece on its way further into Europe.
First deliveries of gas through the pipes are expected in 2019.