Chrysler has already received a $4bn US government loan
German carmaker Daimler has reached a deal to give up its 19.9% stake in Chrysler, the company has said.
The deal, which will also see Daimler forgive Chrysler's outstanding loans, marks a definitive separation of the German and US firms, Daimler said.
Daimler bought Chrysler in 1998 but sold most of the loss-making unit to Cerberus Capital Management in 2007.
Earlier, Chrysler announced a cost-cutting deal with its main US union as it tries to restructure its business.
The struggling Detroit carmaker has until 30 April to complete its restructuring in order to gain further state loans, without which it may have to enter bankruptcy protection.
Chrysler has already received a $4bn loan from the US government.
Loans written off
Daimler had previously written down the value of its Chrysler stake to zero.
The loans it extended to Chrysler when it sold the company had already been written off in its 2008 financial statements, Daimler said.
Under the deal, Daimler has also agreed to pay three annual instalments of $200m (£137m) into Chrysler's pension plans.
"In this way, Daimler is helping to secure pension payments to former employees of DaimlerChrysler," it said in a statement.
In exchange, Chrysler and Cerberus have agreed to waive any claims against Daimler, including the accusations made in 2008 that Daimler allegedly improperly managed certain issues and provided incomplete information over the 2007 sale of Chrysler.
Daimler said it expects the agreement to reduce its second quarter earnings by about $700m.
It added that once the agreement is complete, "the relationship between Daimler and Chrysler will solely consist of supplier-customer relations".