The university agreed to possibly reopen salary talks for 2012-13 and 2013-14. Benefits were maintained at the current level.
The last contract expired two years ago. Faculty had voted in May to authorize strikes for the fall semester. Faculty have not had raises in five years. The University failed to fulfill salary commitments in the last contract.
Both sides said the agreement will allow them to put to rest more than two years of contentious negotiations and work together to push for more revenue for the 23-campus system that has seen $750 million in state funding cuts over the past four years.
The system is one of the largest public university systems in the nation with 400,000 students.
"It's a fair agreement in the context of hard times," said Lillian Taiz, who heads the California Faculty Association, which represents 23,000 professors, lecturers, and other professional employees. "We are disappointed we were not able to get a raise, but that wasn't in the cards. It was a tough pill to swallow, I won't kid you."
"In this extremely challenging budget climate, we are pleased to come to an agreement with the CFA that will allow both parties to move forward and focus on the state's reinvestment in higher education," said John Swarbrick, associate vice chancellor for labor relations.
The improvements in the contract were modest. Much of the union's battle was to preserve items that the university sought to take away, Taiz said.
The university agreed to allow faculty input in determining appropriate class sizes, but the union did not win a guarantee of academic freedom.
The union pushed back on numerous issues, including moving more classes into extension programs and preserving three-year appointments for lecturers, who comprise 55 percent of the faculty.
The union agreed to use its dues to cover more of the cost of faculty members who do union work on university time.
The agreement must be ratified by union members during a voting period scheduled for the last two weeks of August, as well as the board of trustees. The board's next meeting is slated for September.
The CSU system is one of the largest public university systems in the nation with 400,000 students.
The Associated Press contributed to this report.