The agreement -- brokered by Ohio Gov. Ted Strickland in June to avoid a divisive November referendum on the matter -- prohibits new construction of egg farms that pack birds in cages.
It also bans any new tight "gestation crates" for pregnant sows after Dec. 31 and phases out such tight caging within 15 years. In addition, the agreement bans tight crates for veal calves within seven years.
The deal -- which also includes the adoption of "humane euthanasia methods" for sick or injured farm animals -- comes two years after California voters banned extreme caging methods altogether by 2015, The New York Times observed.
California also passed a law this year banning imports from other states of eggs produced in crowded cages, the Times said.
Similar limits were approved in Michigan last year and less-sweeping restrictions have been passed in Florida, Arizona and other states, the Times said.
Ohio is the second-largest U.S. egg producer, after Iowa.
Egg production is at the center of the debate because more than 90 percent of U.S. eggs come from hens living in stacked rows of "battery" cages critics call inhumane.
The cages give each egg-laying hen less space than the size of an 8-1/2-by-11-inch sheet of paper, The Humane Society of the United States says.
The United Egg Producers trade group says egg prices would rise 25 percent if all eggs were produced by non-caged hens, hurting school-lunch programs as well as consumers.
Animal-welfare proponents say better non-cage methods could be developed -- and price is not the ultimate issue anyway.
Factory farming involves raising livestock at "high stocking density" to produce a high output at a low cost.