The government had asked Chrysler to recall 2.7 million Jeep Grand Cherokees from model years 1993 through 2004 and Jeep Libertys from 2002 through 2007, but the company refused earlier this month. Chrysler claimed the National Highway Traffic Safety Administration's conclusions were based on flawed data.
The recall covers only 1.56 million of the 2.7 million Jeeps that the government wanted repaired. The rest are part of a "customer service action" and many may not get fixed.
Chrysler sidestepped a showdown with government safety regulators that could have led to public hearings with witnesses providing details of deadly crashes involving the Jeeps. The dispute ultimately could have landed in court and hurt Chrysler's image and its finances.
"We are pleased that Chrysler has agreed to take action to protect its customers and the driving public," the NHTSA said in a statement. "Consumers impacted by the safety recall and customer satisfaction campaign should have their vehicles serviced promptly once they receive notification from Chrysler."
According to the NHTSA, the gas tanks could rupture if hit from the rear, causing fires. NHTSA said 51 people had died in fiery crashes.
The deal still leaves some Jeep owners with gas tanks that NHTSA just two weeks ago said were risky. Chrysler maintains that they are safe and need no repairs.
Chrysler said in a statement that dealers will inspect the vehicles and upgrade the rear structure if needed to better handle low-speed crashes.
The company maintains that the vehicles aren't defective. NHTSA previously said the vehicles had a design flaw because the tanks were mounted behind the rear axle.
NHTSA began investigating the Jeeps at the request of the Center for Auto Safety. The Washington, D.C., advocacy group is pushing for Chrysler to extend the recall to include 1993-2001 Jeep Cherokees, which it says are still under investigation by NHTSA.
The Associated Press contributed to this report.