BP will pay US$4.5 billion (NZ$5.5b) in penalties and plead guilty to felony misconduct in the Deepwater Horizon disaster that caused the worst offshore oil spill in the country's history, the company says.
The settlement includes a US$1.256b criminal fine, the largest such levy in US history, the company said.
A settlement with the US Securities and Exchange Commission is also part of the deal, as are payments to the National Fish & Wildlife Foundation and the National Academy of Sciences.
The April, 2010 explosion on the Deepwater Horizon rig in the Gulf of Mexico killed 11 workers.
The mile-deep Macondo oil well then spewed 4.9 million barrels of oil into the Gulf over 87 days, fouling shorelines from Texas to Florida and eclipsing in severity the 1989 Exxon Valdez spill in Alaska.
The oil company said it would plead guilty to 11 felony counts related to the workers' deaths, a felony related to obstruction of Congress and two misdemeanours.
BP, which replaced its chief executive after the spill as its market value plummeted, still faces economic and environmental damage claims sought by four Gulf Coast states and other private plaintiffs.
BP has been negotiating for months with the US government and Gulf Coast states to settle billions of dollars of potential civil and criminal liability claims.
BP's US shares were up about 1.3 per cent overnight while its London-traded shares were 0.3 per cent higher.
Wall Street analysts were encouraged that the plea deal could resolve a significant share of the liability BP faces. But it is not a "global" deal to resolve all outstanding civil and criminal liability with the US government and Gulf Coast states.
"It certainly is an encouraging step," said Pavel Molchanov, oil company analyst with Raymond James.
"By eliminating the overhang of the criminal litigation, it is another step in clearing up BP's legal framework as it relates to Macondo."
BP has sold over US$30b worth of assets to fund the costs of the spill. Matching that, it has already spent about US$14b on clean-up costs and paid out, or agreed to pay out, a further US$16b on compensation and claims.
The disaster has dragged it from second to a distant fourth in the ranking of top western world oil companies by value.
In an August filing, the Justice Department said "reckless management" of the Macondo well "constituted gross negligence and wilful misconduct" which it intended to prove at a civil trial set to begin in New Orleans in February 2013.
Negligence is a central issue to BP's potential liability. A gross negligence finding could nearly quadruple the civil damages owed by BP under the Clean Water Act to US$21b in a straight-line calculation.
Still unresolved is potential liability faced by Swiss-based Transocean Ltd, owner of the Deepwater Horizon vessel, and Halliburton, which provided cementing work on the well that US investigators say was flawed. Both companies were not immediately available for comment.
According to the US Justice Department, errors made by BP and Transocean in deciphering a pressure test of the Macondo well are a clear indication of gross negligence.
"That such a simple, yet fundamental and safety-critical test could have been so stunningly, blindingly botched in so many ways, by so many people, demonstrates gross negligence," the government said in its August filing.
Transocean disclosed in September that it is in discussions with the Justice Department to pay US$1.5b to resolve civil and criminal claims.
BP has already announced an uncapped class-action settlement with private plaintiffs that the company estimates will cost US$7.8b to resolve litigation brought by over 100,000 individuals and businesses claiming economic and medical damages from the spill.