"Under the new 10-year sales agreement, De Beers has agreed to move its sorting and trading of the gems to Botswana by the end of 2013, thus ending its long standing arrangement for such sales to take place in London," said government spokesman Jeff Ramsay.
The agreement was signed on Friday by the government and De Beers, he said.
Since it started mining diamonds in the early 1970s, Debswana -- a company equally owned by Botswana's government and De Beers -- has been selling its diamonds exclusively to De Beers, who in turn shipped the diamonds to London for sale to customers.
The agreement, which is back dated from January 1, 2011, is the longest sales contract ever agreed between the two partners.
The deal will see De Beers relocate its sights and sales operation including professionals, skills, equipment and technology from London to Gaborone.
Botswana will for the first time directly sell 10 percent of gem stones manufactured locally while De Beers will also increase the value of diamonds it makes available to manufacturing companies in the country to $800 million a year from the current $550 million.