The two firms run telecom business in India Uninor under a joint venture with Telenor having over 67 percent share. Unitech owns the rest.
Earlier this year, Telenor served a divorce notice to Unitech and sought compensation from the firm following the Supreme Court's order to cancel 122 telecom licences.
"It can be confirmed that the parties agree to support the transfer of the business in Unitech Wireless (Uninor) to a new entity controlled by Telenor," Telenor said in a statement Thursday.
Telenor is preparing to participate in the upcoming 2G spectrum auction through this new entity, but will take a final decision on whether to participate at a later date.
The firm, however, refrained from providing further comments on specific terms and conditions citing confidentiality obligations.
However, it said that Unitech has agreed to dispose of its shareholding in Uninor for a nominal amount.
The statement also said that Unitech nominees will withdraw from the Uninor board with immediate effect and all special shareholder rights stand suspended.
Subsequent to a successful business transfer and spectrum auction, all disputes and claims between the parties shall stand withdrawn, it added.