This is the first production cut by the organization in eight years, and its first intervention in the global oil market since mid-2014 when oil prices began to fall.
At Wednesday’s meeting, members agreed at the cartel's semiannual meeting in Vienna to cap the cartel's total production at 32.5 million bpd, down from 33.64 million in October.
"We came to the understanding that the market needs to be rebalanced," said Mohammed Bin Saleh Al-Sada, president of the OPEC Conference.
The agreement will become effective on January 1, he added.
The adjustments will be applied for six months and will be reconsidered for a six-month extension, Al-Sada said.
The group's decision to cut is based on the desire to raise oil prices and lower excess supply in the market.
OPEC heavyweight Saudi Arabia will carry most of the burden in output reduction, with a daily cut of 486,000 bpd, according to Al-Sada.
The deal also includes non-OPEC countries, like the world's biggest crude oil producer Russia.
Non-OPEC countries will also cut their oil output by an additional 600,000 bpd, while 300,000 bpd of that will come from Russia, Al-Sada explained.
After the announcement of the deal, called "courageous" by Al-Sada, oil prices soared to their highest level in more than a month.
International benchmark Brent crude increased to $51.79 a barrel, while American benchmark West Texas Intermediate rose to $49.33 a barrel. Both benchmarks marked a daily gain of more than 8 percent.
OPEC's agreement to cut its production is its first successful attempt to increase the falling oil prices in more than two years.
The cartel came close to a deal in April, but member differences hampered a positive outcome. The organization began talks in September to reach a tentative deal at its November semiannual meeting in Vienna.