The US Treasury has confirmed it will sell its remaining 6% stake in Chrysler to Fiat for $US500 million.
The sale will sever the federal government's last ties with the company, which it rescued from bankruptcy in 2008-09.
It will also give the Italian carmaker a 52% majority stake in the company.
The BBC reports the deal is expected to leave Washington with a $US1.3 billion loss on the Chrysler rescue.
The US Treasury originally provided $US12.5 billion in emergency loans to the company during the financial crisis and recession.
Since entering bankruptcy during 2009, Chrysler has returned to strong profitability under Fiat's guidance. It recorded a profit of $US116 million in the first three months of this year.
The BBC reports Fiat has also agreed to pay an additional $US75 million to buy an option on Chrysler's shares currently held by the United Auto Workers retiree trust.
