An agreement to end a dispute over the branding of the Cardhu malt has been welcomed by the Scotch whisky industry.
Changes have been made to the packaging of Cardhu
Diageo had angered other distillers by selling what it described as a pure malt in the same style of bottle and label as its original single malt.
It has now agreed to make significant changes to the packaging and run a new promotional campaign.
The Scotch Whisky Association (SWA) said it would "urgently" pursue work to clarify definitions used by the industry.
Tony Hunt, deputy group managing director with rival distiller William Grant & Sons, said he was "absolutely delighted" with the outcome.
"It is great news for the industry, it is great news for the single malt category and it is great news for consumers, because they know that when they buy a bottle of single malt they are getting what they should be getting," he told BBC News Online Scotland.
A spokesperson for Diageo said it was "very pleased" that the SWA had backed its proposals.
Cardhu had become a top selling brand in countries like Spain and Portugal, with sales rising from 30,000 to 280,000 cases over the last decade.
The whisky was originally a single malt produced at one distillery.
However, after reaching capacity at the distillery Diageo decided to change the process and use a combination of single malts from Speyside.
The original packaging caused controversy
It changed the status of the whisky from a single malt to what it described as a pure malt.
But other distillers expressed anger that Diageo was continuing to use the name Cardhu while only changing the word "single" to "pure" on the label.
Some accused Diageo of misleading the public, cheapening malt whisky as a brand and damaging the industry's reputation.
Under the agreement reached at Thursday's meeting of the SWA the drinks giant will continue to use the name Cardhu.
However, Diageo has agreed to alter the labelling and colour of the packaging, which will change from brown to green.
It also promised not to make any similar changes to any of its other single malts and to run promotional campaigns in countries where the brand sells well to clear up any confusion about the product.
It also agreed to work with the rest of the industry to set out definitions for the different categories of whisky, starting with single malts.
Gavin Hewitt, of the SWA, said: "I think the important thing is to recognise that there has been a huge change in where Diageo now stands.
"They have recognised there were dangers in where they were going, particularly the issues of trying to suggest it to a consumer that it was the same product.
"That, of course, is a very contentious issue and they have responded in a very good spirit to the concerns of the rest of the industry, to recognise that the industry as a whole is much bigger than any individual partner."
A spokesperson for Diageo said it had always sought to resolve the issue through the SWA.
"We acknowledge that we might have managed our consultation process with the SWA executive more effectively, and for that we are sorry," said the company.
"It is now time to put this episode behind us and we look forward to continuing to work within the SWA and growing the Scotch whisky industry as a whole."
Scottish National Party leader John Swinney also welcomed the announcement.
"Work can now focus on reaching agreed definitions that will govern whisky," he said.
"That will be a major step towards a secure future for one of Scotland's premier league brands."