Analysts believe the agreements reached will enhance both countries' chances of early Nato membership and could mean Romania joining the current favourites - the Czech Republic, Poland and Hungary - in the first group of new members to Nato to be announced at the alliance's next summit in July.
"We have signed an agreement on the protection of secrets that will enable ... close military co-operation," Hungary's defence minister, Gyorgy Keleti, said, after signing the accord with his Romanian counterpart, Victor Babiuc, in the Hungarian city of Debrecen near the Romanian border.
"We have also agreed to set up a joint Hungarian-Romanian peace-keeping battalion for use with Nato, the United Nations and the Organisation for Security and Co-operation in Europe."
Hungary's defence ministry official responsible for Nato integration, Istvan Gyarmati, said he and his Romanian counterpart had been entrusted with working out the details of the new unit. Mr Gyarmati added that the Romanian part of the new battalion will be based in Romania and the Hungarian part in Hungary, with a joint command and joint exercises.
Mr Keleti said the agreement on the protection and exchange of military secrets was Hungary's first with an east European neighbour. "It will entitle us to exchange important military information," he said. "So far, we only have such agreements with the United States, Germany and Sweden."
Bucharest's new centre-right government, elected last November after seven years of rule by ex-Communists, is trying to boost Romania's chances of early admission to Nato by developing a new partnership with Hungary.
Romania's new president, Emil Constantinescu, appointed two leaders of Hungary's ethnic minority to his government, while foreign minister Adrian Severin's first trip abroad was to Hungary, to exchange ratified basic treaty documents with his Hungarian counterpart, Laszlo Kovacs.
The treaty, signed in September, aims to end old quarrels by guaranteeing Romania's western borders and ensuring the rights of Romania's 1.6 million ethnic Hungarians. It is seen as vital to the ambitions of Romania and Hungary to move closer to Europe.