Alicia Keys is to be one of Sony Music Entertainment's artists
Sony has agreed to buy Bertelsmann's 50% stake in their Sony BMG music joint venture in a $1.2bn (Ł613.7m) deal.
The music company is to be renamed Sony Music Entertainment Inc (SMEI) and will become a wholly-owned subsidiary of Sony Corporation of America.
SMEI - the world's second largest music company after Universal - will include artists such as Alicia Keys, Bruce Springsteen and Justin Timberlake.
The deal ends the tie-up between Sony and Bertelsmann signed in 2004.
The music group will include labels such as Arista Records, Columbia Records, Epic Records, J Records and RCA Records.
Both sides will continue to share manufacturing and distribution between Sony's manufacturing subsidiary, Sony DADC, and Bertelsmann's services company, Arvato Digital Services.
Bertelsmann has been selling off a number of assets as it seeks to streamline its business.
"This move is consistent with our new growth strategy and will enable us to focus on our defined growth areas," said Bertelsmann chief executive Hartmut Ostrowski.
The deal, which requires regulatory approval, is set to be completed later in 2008.