Under the Business Transformation 2010 and Beyond agreement, basic pay rates will improve by nearly 7% over three years from 1 April, while the working week has been cut by one hour.
The deal, part of Royal Mail's £2bn modernisation programme, also means each employee will receive a £1,000 lump sum upon delivery of planned changes at the company.
Dave Ward, deputy general secretary at CWU, welcomed the deal calling it "a balance of pay and operational changes" that would help offset any future job losses.
He said: "It's been a long time coming, but this deal delivers on the major issues that postal workers have fought for.
"We have always said that we couldn't face away from change. The agreement recognises the reality of automation, competition and the financial challenges facing the company, but it does so in a way that puts the interests of CWU members at its heart."
The agreement brings to an end a long-running chapter of walkouts, job cuts and often bitter negotiations between the pair. The closing months of 2009 were characterised by repeated strikes within the service in protest at the operator's modernisation plans and its effect on staff.
In January of this year, Royal Mail chief executive Adam Crozier announced he was leaving the organisation in order to take over the same position at ITV.
Commenting on the new deal, Crozier said it was a positive step that would allow Royal Mail to pursue its modernisation plan.
He added: "It’s a good and fair deal for our people, and it’s a good deal for our customers as it ensures stability over the next three years."
Graham Cooper, managing director of postal consultancy Onepost, said the deal was "good news" for the industry.
"The UK postal industry needs Royal Mail to continue as a strong incumbent operator, without that the entire mailing industry is not sustainable."
Cooper added: "We will hopefully now see a return to Royal Mail meeting or indeed exceeding their Quality of Service targets which were severely hit by the industrial action of last year."
