The 20-year development contract is one of several deals that Iraq expects to finalise in the coming weeks as it tries to catapult itself to third place from 11th in the league of oil producing nations.
The deal was signed at Iraq's Oil Ministry in the presence of Iraqi Oil Minister Hussain al-Shahristani, Shell's chief executive, Peter Voser, and a vice president of Shell Gas and Power, Mounir Bouaziz.
The signing ceremony was delayed for several hours by the late arrival of Voser's airplane. "We have been working in Iraq for around 50 years and we look forward to actually come back and bring our technology and our people into Iraq in order to develop the oilfields in Iraq and to bring oil to world-wide customers," Voser said.
The Majnoon deal is a key to Iraq's ambitious plans to revive its stagnant oil sector after years of war and economic sanctions that allowed infrastructure to fall into disrepair.
Iraq hopes to boost output capacity to 12 million barrels per day (bpd) - rivalling Saudi Arabia and Russia - from around 2.5 million bpd now. Majnoon, near the southern oil hub of Basra, is one of the world's biggest largely untapped fields.
Royal Dutch Shell owns 60 percent of the venture, with Malaysia's state-run Petronas holding the rest. The companies proposed a remuneration fee of $1.39 per barrel and a plateau production target of 1.8 million bpd compared with current output of just under 50,000 bpd.
Shell officials have said the companies would invest "tens of billions" of dollars over the life of the deal and that work would start immediately once the final contract was signed.