As part of the agreement, the couple will be required to step back from their royal duties, including military appointments, and no longer represent the Queen, the statement from Buckingham Palace said.
Harry and Meghan will no longer receive funds for royal duties, it said. The arrangement will go into effect this spring.
“Following many months of conversations and more recent discussions, I am pleased that together we have found a constructive and supportive way forward for my grandson and his family,” Queen Elizabeth II said in a statement.
“Harry, Meghan and Archie will always be much loved members of my family,” she said. “I recognise the challenges they have experienced as a result of intense scrutiny over the last two years and support their wish for a more independent life.”