State officials decided to put the property up for sale last summer to help cover the state budget deficit.
Under terms of the deal, the Orange County Fairgrounds Authority will put up $96 million to buy the property. The "authority" includes the city of Costa Mesa and the Costa Mesa Public Finance Authority.
The deal was reached after months of negotiations and requires legislative approval. Negotiators say it will give the state some of the money it desperately needs, and at the same time keep the land in the public domain.
Officials call it a "win-win" deal for California and the people of Orange County.
After the deal is approved the fairgrounds will be owned and managed by the Orange County Fairgrounds Authority. The city of Costa Mesa will become a partner with Facilities Management West of Orange County, the O.C. Fair Amphitheater Market, and Expo, LLC to run the fair and other events.
The Orange County Fairgrounds Authority will immediately pay the state $19.2 million and make payments for the balance.
In January, the Department of General Services held a public auction for the property. However, the highest bid of $56.5 million was rejected as insufficient.
City News Service contributed to this report.