The decision, at an extraordinary Southern African Development Community (SADC) meeting, ended the worst political crisis since the administration was formed in February.
"We have suspended our disengagement from the GPA (Global Political Agreement) with immediate effect and we will give President Robert Mugabe 30 days to implement the agreement on the pertinent issues we are concerned about," he told reporters after a regional summit.
Tsvangirai’s Movement for Democratic Change (MDC) began boycotting cabinet meetings with Mugabe’s ZANU-PF last month in a dispute over the implementation of the power-sharing deal they reached after a disputed election.
Western donors are reluctant to send funds to Zimbabwe until a stable government creates a democracy that can implement political and economic reforms.
The meeting summit attended by Swaziland’s King Mswati III, Mozambican President Armando Guebuza, Zambian President Rupiah Banda and President Jacob Zuma of South Africa urged Zimbabwe’s political leaders to "engage in a dialogue with immediate effect".
Old foes Mugabe and Tsvangirai also took part.
Asked what would happen if Mugabe did not fully implement the power-sharing, Guebuza said the next round of talks would be evaluated and then a decision would be made on how to proceed. He did not elaborate.
Zimbabwe’s government has managed to stabilise an economy ravaged by hyperinflation, but is still severely strained by political disputes likely to keep foreign investors away.
Tsvangirai has accused Mugabe of being a "dishonest and unreliable partner" for refusing to implement power-sharing fully, particularly regarding senior appointments such as the central bank governor and the attorney-general.
The MDC also accuses ZANU-PF of persecuting MDC officials and holding back media and constitutional reforms which are vital for holding free and fair elections in about two years.
Mugabe says he has met his side of the deal and insists the MDC must campaign for the lifting of Western sanctions against his ZANU-PF, including travel restrictions and a freeze on general financial aid to Zimbabwe.
Instability in the new government was highlighted last month when a U.N. human rights expert was detained at Harare airport by Zimbabwean security agents, even though he said he had been invited by Tsvangirai.
Human Rights Watch has urged SADC leaders to press Mugabe’s ZANU-PF to end what it called "ongoing human rights abuses".
"Recent reports that ZANU-PF continues to arrest and harass human rights and civil society activists should act as a warning to the regional leaders that Zimbabwe may slide back into violence and chaos if they do not take decisive action," said Georgette Gagnon, Africa director at Human Rights Watch.