The settlement total of $4.5 billion over five years includes nearly $1.3 billion in criminal fines - the largest such penalty ever - along with payments to several government agencies.
The largest previous corporate criminal penalty assessed by Justice Department was a $1.2 billion fine imposed on drug maker Pfizer in 2009.
The London-based multinational company also said in the statement that it agreed to plead guilty to charges including 11 felony counts of misconduct related to the deaths of 11 men in the rig explosion that triggered the massive oil spill along the Gulf Coast. It also pleaded guilty to a felony count of obstruction of Congress.
A person familiar with the deal had earlier said two BP employees will face manslaughter charges over the 11 deaths.
The Deepwater Horizon oil rig, 50 miles off the Louisiana coast, sank after the April 2010 explosion. The well on the sea floor spewed an estimated 206 million gallons of crude oil, soiling sensitive tidal estuaries and beaches, killing wildlife and shutting vast areas of the Gulf to commercial fishing.
The cost of BP's spill far surpassed the Exxon Valdez spill in 1989. Exxon ultimately settled with the U.S. government for $1 billion, which would be about $1.8 billion today.
ABC News contributed to this report.
