Max Mosely, president of the FIA, has agreed to scrap his plans to impose a controversial voluntary budget cap of about £40m and announced he is to step down in October.
The FIA says budget rules for the 2010 season will now be the same as this season and that teams have agreed to reduce costs to the level of the early 1990s.
The body has been looking to cut costs over concern that the sport will be adversely affected by the global economic downturn.
The sport has come under intense financial pressure of late as sponsors and manufacturers reduce investment amid the global economic downturn.
Earlier this year one of the sport’s biggest backers, Dutch bank ING, announced it was cutting its Formula 1 sponsorship spending by 40% as part of a €1bn cost-cutting drive. This followed Honda’s retreat from F1 in December.
The proposed cap had been bitterly opposed by the majority of F1 teams. The eight, which include BMW-Sauber, Brawn, Ferrari and McLaren, via the Formula One Teams Association, said last week that they were to form a breakaway tournament after claiming that they “cannot continue to compromise on the fundamental values of the sport”.
The BBC will be relieved that an agreement has been reached. The corporation is only one season into a four-year deal to broadcast the championship.