The agreement establishes peace tribunals and a reconciliation commission to provide justice for victims related to the yearslong rebellion and punishing those who have perpetrated crimes.
"We have agreed to create a special jurisdiction for peace that is going to guarantee that the crimes committed during the conflict, especially the most serious ones, will not remain unpunished," Santos said.
"Peace is possible and is closer than ever!" the President tweeted.
The breakthrough came in Havana, Cuba, where officials from both sides had met to try to hammer out a deal.
The leftist group began its war against the Colombian government in the 1960s, making it the longest-running insurgency in Latin America.
FARC continues to champion leftist causes. But with Colombia being one of the world's top cocaine producers, the rebels have added drug trafficking to their list of atrocities.
The group is estimated to make $500 million from the illicit trade per year, according to the Council on Foreign Relations. FARC is considered a terrorist organization by the United States and the European Union.
The two sides have been engaged in peace talks for about three years, a time marked by both progress and setbacks. FARC, for example, announced a unilateral ceasefire earlier this year only to call it off
That was one of many ceasefires that both sides had implemented, then retracted, over the years -- signaling the entrenched positions and bitterness on both sides.
Still, the talks have continued focusing on major points such as land reform, rebels' political participation, the elimination of illegal crops, the rights of victims, the disarming of FARC and how a final agreement would be enforced.
Santos has said Colombians will have the opportunity to vote in a referendum on any potential deal, a promise he repeated on Wednesday.
Despite the agreement, a smaller armed group remains at war with the government.
Santos blamed the National Liberation Army, a leftist guerrilla movement known as ELN, for two July explosions in Bogota
that injured at least eight people.