The merger, which is expected to get regulatory backing and be concluded by the end of next year, is set to create the world's third largest airline.
Under the terms of the deal, BA will hold a a 55% stake in the new company with Iberia holding 45%.
The combined firm would have 419 aircraft flying to 205 destinations, and BA and Iberia said it would save them a total of 400m euros ($594m; £358m) in costs a year.
However, Iberia says it can pull out of the deal if BA fails to resolve its pension deficit problem.
"This is all about the future, about creating a strong European airline at which BA will be at the heart," said Mr Walsh.
"The headquarters will be based here [in London], it will be listed in the UK, I will be chief executive."
He denied speculation that, following the merger, BA's level of cabin service would be reduced to Iberia's level.
"There is no question about British Airways' standards. We are working to improve them, and think we are doing a tremendous job," he said.
Responding to the question of whether the planned merger would result in significant job cuts, he said: "I don't think staff will be worried, consolidation is part of our industry."
Unite's national office for civil aviation, Steve Turner, said the union was seeking urgent talks with BA.
"It is imperative that both companies sit down as soon as possible with the unions here and in Spain to discuss how jobs and standards can be safeguarded," he said.
Unite is already balloting its members among BA's cabin crew on whether to take action over the company's existing cost-cutting plans, while Iberia staff have already gone on strike over pay and plan more disruptions in the run-up to Christmas.
Analysts say that post-merger job cuts are expected among administrative staff, but that with the headquarters of the new firm being established in London, redundancy fears are strongest in Spain.
Aviation expert Douglas McNeil of Astaire Securities said BA would be "relieved" to have finally got the merger deal in place.
"I think BA will be pleased with the deal they have got - the headquarters in London, led by Willie Walsh, and BA will be majority shareholder," he said.
However, Virgin Atlantic, one of BA's big competitors in the UK, raised concerns over the new company's market share.
Both BA and Iberia have been losing money during the downturn as businesses and individuals cut back on flying.
Mick Rix, GMB union: "A friendly merger is far better than a hostile takeover"
Mr Walsh has previously said a merger would help both firms cope with the recession.
The firms have considered a tie-up for a number of years and held talks on the issue in July 2008.
BA already owns 13.5% of Iberia and the two carriers have a code-sharing agreement under the One World grouping of airlines, which allows them to sell seats on each other's services.
The agreement comes a week after BA said it would cut a further 1,200 jobs and reported a loss in the first half of its financial year for the first time in its history.
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