The deal has still to be ratified in the US Congress, where some Democrats have expressed concern for job losses in the American car industry.
The agreement phases out tariffs on almost all consumer and industrial goods in the next three years.
Trade between the nations is worth about $80bn (£40bn) a year.
'Unfair'
The pact was signed in Washington by US trade representative, Susan Schwab, and her South Korean counterpart, Kim Hyun-chong.
It is the largest deal of its kind since the North America Free Trade Agreement was signed in 1993.
The latest deal has sparked opposition on both sides.
Many Korean workers and farmers fear it will cost them their jobs.
US Democrat Senator Hillary Clinton said in the car-making centre of Detroit recently that the deal, agreed in April after 10 months of negotiations, was "inherently unfair".
But its supporters, from many business groups, say it will expand opportunities for the US across a range of sectors, including banking and telecommunications.
"It's a great day for international trade," Ms Schwab said.
The deal had to be signed by a 30 June deadline or Congress would have been given the power to alter its terms. US lawmakers can now either reject or accept it.