The agreement calls for Jackson's mother to remain guardian of the pop icon's three children, who range in ages from 7 to 12, in accordance with wishes spelled out in the singer's 2002 will. No money is changing hands as a result of the agreement, the statement said.
Deborah Rowe, the biological mother of the two oldest children who has been largely absent from their lives, gets visitation rights with the youngsters. A child psychologist, paid for jointly by Jackson and Rowe, will oversee the process, attorneys for Katherine Jackson and Rowe said in a statement.
The timing and frequency of the visits will be determined by both parties in consultation with the psychologist, the statement said.
Attorneys had worked for weeks to reach an amicable arrangement. The agreement announced Thursday ends the likelihood of a contentious and public custody fight over Jackson's children.
"Mrs. Jackson and the family are pleased this matter is resolved and was handled in a caring, thoughtful and courteous manner by the parties and their representatives," L. Londell McMillan and Diane Goodman, attorneys for Mrs. Jackson, wrote in a statement.
"We were all united in our goals to do what is best for Michael's wonderful children, and both Mrs. Jackson and Debbie Rowe were on the exact same page."
Eric M. George, an attorney for Rowe, called the agreement a "dignified outcome." George credited Mrs. Jackson's attorneys for their work on the deal, and expressed pride with Rowe for "her integrity and selflessness."
Rowe never petitioned for custody of Jackson's children. The agreement is likely to be discussed during a hearing Monday in Los Angeles Superior Court. That hearing will now focus more on lingering issues with Jackson's multimillion dollar estate, which Mrs. Jackson has vied for control of.
Michael Jackson, who died June 25 at 50, was the sole parent to his three children. He was married to Rowe, but both had described the relationship as borne out of friendship and that Rowe had given birth to his two oldest children as a "gift." They divorced after Paris-Michael was born.
His third child, 7-year-old Prince Michael II, known as Blanket, was born to a surrogate and the mother's identity has never been revealed.
In Jackson's will, he expressed his desire to have his mother take care of his children. If she was unavailable, Jackson called for friend and singer Diana Ross to step in.
After Jackson's death, Rowe expressed interest in raising not only her two children, but Blanket as well. In a phone interview with television station KNBC, she also said she would seek a restraining order against Joe Jackson, Michael's father; Michael Jackson had a complicated relationship with him and often spoke of beatings at the hands of his father.
After Mrs. Jackson, 79, was named by a court as the children's temporary guardian, Rowe was granted a delay in a guardianship hearing while she decided whether to seek custody. Other hearings were delayed at the request of both parties, and McMillan had described the negotiations between both sides as cordial.
Rowe has taken legal action and demanded retractions as other reports have claimed that she was seeking money from the Jacksons in exchange for dropping any attempt at custody of the children.
Michael Jackson gave Rowe a financial settlement after they divorced in 2000 and she relinquished her parental rights. But they were reinstated by a judge in 2005 after Rowe went to court over the children. The custody dispute was settled in 2006. Terms were not disclosed, though Jackson retained primary custody.
All three children have been living with Katherine Jackson since their father's death, where they have been surrounded by their aunts, uncles and cousins.