The union says the tentative deal includes three per cent annual wage increases, a curtailing of outsourcing and increased benefits.
The employees covered by the new contract maintain, repair and build tracks, bridges and other structures for the railway.
A ratification vote is expected in January.
The deal follows an announcement by the railway last week that it will look to cut about 4,500 jobs as part of a plan to drive down costs.
The move is part of an overhaul at the railway by CP chief executive Hunter Harrison, who took over earlier this year after bitter proxy fight.
Union president William Brehl praised Harrison and changes being made to the culture at the railway, noting the contract talks were more civil.
"They're cutting fat, not muscle," Brehl said in a statement.
"And presently, they're working with us instead of treating us like enemies, which was the modus operandi of previous regimes. The long-term safe and productive operation of the railroad is in all of our best interests."
Harrison has been looking to cut costs across the board at CP and improve its operating ratio, a key measure of railway efficiency.
CP said last week that it was exploring options that included the possibility of selling surplus real estate, as well as its Delaware and Hudson line in the U.S. Northeast.
The railway also announced it was seeking buyers for a part of its DM&E line that stretches about 1,000 kilometres across several states in the U.S. Midwest.
Meanwhile, it will move its current corporate headquarters in downtown Calgary to new office space at its Ogden Yard, about 10 kilometres away, by 2014.