Selkirk will host Vale of Leithen next month with a place in the William Hill Scottish Cup third round waiting for the winners.
Selkirk, who beat Glasgow University 2-0, and Vale, who edged past Threave Rovers 1-0, are the last remaining Borders sides in this year's competition.
Although both were hoping for an away day at Ibrox against Rangers, the Yarrow Park clash is a mouth-watering alternative.
Former Rangers and Everton star Trevor Steven made the draw in Glasgow on Monday. And Selkirk boss Mike McKinnon was standing next to his Vale counterpart, Fraser Ogilvie, when the names came out of the hat.
McKinnon said: "We shook hands and wished each other the best when the draw was made.
"We all wanted the plum tie against Rangers but when that went you want a team that you know - and can beat. We will not get a better chance iof getting into the third round and I'm sure Vale will be thinking the same.
"This will be one of the biggest derbies either of us have had in a long time - and we can't wait."
The September 29 winners will be guaranteed around £10,000 with the opportunity to face team including Rangers and others from the Irn Bru first and second divisions.
Selkirk vice-chairman Ross Anderson told us: "There were a few oos and ahs when we were drawn together. Out with the Rangers tie we'll attract a lot of interest, which has to be a good thing for local football."
Fraser Ogilvie believes the Borders clash will be a memorable one. He told us: "With so much at stake I expect everyone will want to come and watch this one. You will have two teams who believe they can win and will be doing everything they can to reach that third round."