Bedfordshire County Council has scrapped its £250m outsourcing contract after coming to a mutual agreement with Hyder Business Services (HBS) over how to end the deal.
The row had threatened to develop into a costly and public legal battle after the council served a one-month termination notice on HBS last month over what it claimed were "breaches of contract" relating to key performance targets. HBS disputed the council's claims.
The 12-year outsourcing contract was originally signed in June 2001 and covers a range of services including IT, call centres, communications, HR, finance, education, business support, and highways and transport.
The transfer of more than 500 staff and services back to the council began earlier this week after Bedfordshire and HBS agreed terms to end the deal amicably.
A statement from the council said: "The precise details of the settlement remain confidential. However, as part of the agreement, Bedfordshire County Council has agreed to withdraw its previous notice of termination against HBS and both parties have agreed to the termination of their business relationship by mutual agreement."