The state and the airlines' parent companies reached a deal in which the two carriers promise to keep scheduled daily service to 22 state airports, including rural airports often used by military personnel, for at least three years, Attorney General Greg Abbott, who is running for governor, said in a news conference.
The deal also calls for the "new American" to keep Dallas/Fort Worth International Airport as a hub and to keep its headquarters in the Dallas area, Abbott said in a news release.
The agreement makes binding what the airlines promised to do when they announced their merger Feb. 14, The Dallas Morning News said.
"I'm proud to join today with American Airlines and US Airways to announce we have successfully negotiated a settlement," Abbott told reporters at DFW alongside Thomas W. Horton, chairman, president and chief executive officer of American and parent AMR Corp.
Horton dodged a question about whether American and US Airways discussed a settlement with the Justice Department.
"We have regular discussions with the DOJ," he said, declining to elaborate.
The Justice Department had no immediate comment on Texas' withdrawing from the lawsuit or on its discussions with AMR.
Abbott, a former judge in his second term as attorney general, is running to succeed Republican Gov. Rick Perry.
Abbott at first said he opposed the merger because he thought the diminished competition would lead to higher prices and reduced service.
He was criticized for his position by his GOP rival in the governor's race and by a Democratic state senator expected to join the race, The Wall Street Journal reported. Other Texas politicians and communities have also condemned his position.
Abbott denied Tuesday political considerations played a part in either joining the lawsuit when it was filed Aug. 13 or deciding to withdraw now.
Texas' withdrawal leaves five other states -- Arizona, Florida, Michigan, Pennsylvania and Tennessee -- and the District of Columbia as parties to the Justice Department's lawsuit opposing the merger.
The department argues the deal would harm airline competition and result in higher airfares, higher fees and fewer consumer choices. AMR and US Airways Group Inc. claim the merger would cut costs by $500 million, letting them offer more flights to more cities at lower prices and with better service.
The Justice Department's case is to go to trial in U.S. District Court in Washington, D.C., Nov. 25.