The deal was signed by the Association of Colleges, NATFHE and the Association of Teachers and Lecturers.
However, it ducks the controversial issue of working hours. Instead, the statement promises that "rather than focusing on a national collective agreement we will now engage in addressing a range of employment issues affecting the sector with a view to developing best practice".
Joint working parties will look at a range of issues, from lecturers' pay and conditions to the employment of part-time lecturers, staff development and appraisal.
Existing local agreements will remain, but the agreement recognises that "all colleges should have in place a local recognition and procedural agreement". Work will now start to develop a model agreement based on the Government's Fairness at Work proposals.
Peace comes just days after a NATFHE conference to mark the sixth anniversary of the dispute. Paul Mackney, NATFHE general secretary, used the conference to win the backing of local union officials for a peace deal.
"Setting a climate where a degree of trust can be re-established is very important," said Mr Mackney. The union would try again to find a national agreement on working hours, he said. "But after six years we decided to move on to other pressing issues."
David Gibson, AOC chief executive, said: "I can't think of anything worse than falling back into the management-union warfare" .
Failure to settle the dispute was also jeopardising pound;720m in expansion cash.