Leaders from both nations confirmed a conclusion had been reached after talks that spanned more than two years.
The deal is expected to be signed on Monday and covers 17 areas such as e-commerce, Chinese officials said.
China is South Korea's largest trading partner and their bilateral trade grew to $228.9bn (Â£143bn) in 2013.
South Korea has been running a trade surplus with China since 1993, and the surplus was $62.8bn last year, according to South Korean data.
"South Korean and Chinese leaders today declared an effective conclusion of the FTA at a summit meeting held at the Great Hall of the People in Beijing," said a statement from Korea's presidential office, referring to a meeting of South Korean President Park Geun-hye with China's President Xi Jinping at the Apec summit.
Local media reports said the deal included a move to remove tariffs on over 90% of goods in the next two decades.
With China and South Korea the world's first and seventh largest exporters respectively, a tie-up between the two is key for the region's economic growth.
South Korea, Asia's fourth largest economy, already has trade agreements with the European Union and the US.
China and South Korea are set to sign a free trade agreement that aims to remove most barriers to trade between the countries.