DCNS will solely produce the Scorpene submarine while Navantia will produce its S80 vessel, DCNS said in a statement.
"DCNS and Navantia have put an end to their disagreement concerning their submarine collaboration," DCNS said in a statement. "As a result, the arbitration procedure between them will be terminated.
"Scorpene submarines will from now on be built and marketed by DCNS. Similarly, S80 submarines will be built and marketed by Navantia.
"Neither party will make any further comments," it said.
DefenseNews reported the two companies had shared development and construction of the Scorpene submarine but relations between DCNS and Navantia deteriorated after Navantia started a program to build the S80 submarine.
The S80 is larger than the Scorpene and is based on a new design that includes air independent propulsion, a land-attack cruise missiles and a Lockheed Martin combat management system.