Saudi Arabia is the world’s biggest destination for Indonesian maids, with around one million in the kingdom.
However, Indonesia placed a moratorium on sending new maids to the country in 2011 after a helper was beheaded for murdering her employer.
Authorities failed to inform Jakarta in advance of the execution.
The case worsened existing tensions caused by reports of abuse and complaints by rights groups that maids are deprived of their basic entitlements.
An agreement signed in Riyadh by Indonesian and Saudi officials aims to give maids better protection, senior Indonesian foreign ministry official Tatang Razak said.
It guarantees them basic rights to communications and the payment of monthly salaries through a bank account and stops employers from keeping their passports.
But Human Rights Watch says the agreement lacked clear enforcement mechanisms for workers who are typically isolated in private homes, unaware of their rights and unable to speak Arabic.
"These reforms do not address the long history of workers coming forward with complaints only to be slammed with counter-allegations of theft, witchcraft or adultery by their far more influential, well-connected, and often wealthy employers," Nisha Varia from HRW’s women’s rights division said.
The agreement is "a step forward, but the road to find justice is still far away" due to the poor labour system in Saudi Arabia and the business-oriented worker placement system in Indonesia, Indonesian group Migrant Care said in a press release.
Mr Razak from the foreign ministry said a committee from both sides would be formed to discuss how the agreement would be implemented.
Indonesia sends maids to work in many countries including Gulf states and places in Asia such as Malaysia and Hong Kong.
