Daimler has agreed to give up its 19.9% stake in Chrysler which will see the German brand forgive its outstanding loans owed by the US manufacturer.
Daimler bought Chrysler over 10 years ago but sold most of the loss-making unit to Cerberus Capital Management in 2007.
Under the deal, Daimler has also agreed to pay three annual instalments of $200m (£137m) into Chrysler's pension plans.
Daimler said: “The loans that were extended to Chrysler had already been written off in our 2008 financial statements.
"In this way, Daimler is helping to secure pension payments to former employees of DaimlerChrysler.”
In exchange, Chrysler and Cerberus have agreed to waive any claims against Daimler, including the accusations made in 2008 that Daimler allegedly improperly managed certain issues and provided incomplete information over the 2007 sale of Chrysler.
Daimler said it expects the agreement to reduce its second quarter earnings by about $700m (£479m).