The sale creates a new company out of a Big Three automaker with plunging sales, which have fallen to 10 percent of the domestic market, The New York Times reported.
Chrysler ranks behind Honda with the fifth largest U.S. sales. But idle factories and a restructuring could see changes, including a chance to pair up with Fiat, which specializes in small, more fuel-efficient cars.
The U.S. Supreme Court removed the last obstacle in Chrysler's road to restructuring, refusing to extend a stay given creditors who wanted a better return on their investment. Chrysler filed for Chapter 11 bankruptcy protection on April 30.
The sale gives Fiat 20 percent of the company initially and the United Auto Workers a 55 percent share.
In time, Fiat could increase its shares to 35 percent if it reaches various financial goals, The Detroit News reported.
The U.S. government would control 8 percent; the Canadian government 2 percent, CNN reported.
Federal bankruptcy Judge Arthur Gonzalez in New York ruled Tuesday that Chrysler could proceed with a plan to cut 789 dealerships from its sales network.
The company also expects to shutter eight factories when it reorganizes. However, with all production shut down, Chrysler is currently losing $100 million a day.