Kenya plans to buy electricity from Grand Ethiopian Renaissance Dam (GERD) that began generating power for the first time last weekend.
Ethiopia hopes to generate about $1bn (£746m) in annual revenue from electricity exports to neighbouring countries and beyond.
A new agreement was reached between the two neighbours earlier this month. It is not yet clear how much power Kenya is signing up for and at what cost.
Kenyan Energy Minister Monica Juma said this move would be key to powering the country’s economic growth.
The first turbine at the Grand Ethiopian Renaissance Dam (Gerd) has begun generating 375 megawatts (MW) of power.
Ethiopia started building the $4bn dam in its northern highlands, from where 85% of the Nile’s waters flow, in 2011.
When the reservoir behind the dam has filled it is expected to generate more than 5,000 MW of electricity by 2024.
This will more than double Ethiopia’s current electricity output.
However, the dam has long been a source of contention between Ethiopia and downstream countries Sudan and Egypt.
They see the dam as a threat to their water security because of their high dependence on the River Nile.