The group will buy 80.1% of the US manufacturer for £3.7 billion, DaimlerChrysler announced this morning.
DaimlerChrysler will retain a 19.9% stake in Chrysler and will meet with shareholders in autumn to decide whether to shed its double barrel name to just Daimler.
Chrysler will still have to meet pension and healthcare costs.
DaimlerChrysler expects the deal with Cerberus to be finalised in the third quarter of this year.
This will reduce the company’s net profits by approximately £2.7bn for 2007.
Dr Dieter Zetsche, chairman of the board of management of DaimlerChrysler and head of Mercedes, said: "We're confident that we've found the solution that will create the greatest overall value - both for Daimler and Chrysler.
“With this transaction, we have created the right conditions for a new start for Chrysler and Daimler."