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You and the neighbor can agree on where you want the line to be and make a "lot line agreement" between yourselves. Then you make it official by signing deeds that describe the boundary. If you decide to do this, make sure you research local zoning and subdivision laws that you may need to comply with.
If you have a mortgage on the property, consult an attorney for help in drawing up the deeds. You may need to get the permission of the mortgage holder before you give your neighbor even a tiny piece of the land.
Once you have signed a deed, you should record (file) it at the county land records office, usually called the County Recorder's Office, Land Registry Office, or something similar.
To learn more about deeds and boundary agreements, check out Deeds for California Real Estate, by Mary Randolph (Nolo), which contains sample deeds, and Neighbor Law: Fences, Trees, Boundaries & Noise, by Cora Jordan (Nolo), where you'll find more details about boundary agreements and a sample written boundary agreement.