The department said it agreed to drop the lawsuit that stood in the way of a merger between the two airlines if the carriers agreed to trade in some of their airport slots that would go to low-cost airlines.
USA Today reported Tuesday the agreement allows for more low-cost options for consumers in Boston, Chicago, Dallas, Los Angeles, Miami, New York and Washington.
"This agreement has the potential to shift the landscape of the airline industry," U.S. Attorney General Eric Holder said.
"By guaranteeing a bigger foothold for low-cost carriers at key U.S. airports, this settlement ensures airline passengers will see more competition on nonstop and connecting routes throughout the country."
"This is an important day for our customers, our people and our financial stakeholders. This agreement allows us to take the final steps in creating the new American Airlines," said Tom Horton, chief executive officer of American.
The airlines said trading in the landing options -- including 44 landing slots at Reagan International Airport in Washington and 12 at LaGuardia in New York -- would not create the need to reduce personnel.
"This is very good news and we are grateful to all who have made it happen," US Airways CEO Doug Parker said.