The agreement came hours before Chief U.S. District Judge Marcia Krieger was scheduled to consider a temporary injunction to block portions of the law, The Denver Post reported Thursday.
"The agreement accomplishes everything we wanted," said David Kopel, the attorney for the plaintiffs, who included 55 sheriffs.
The law limits gun magazines to 15 rounds. Plaintiffs who had sought the injunction said a "grandfather" clause would have made it illegal for someone who had a magazine that held more than that to lend it to someone else.
The agreement calls for Attorney General John Suthers to write new guidelines stating possession of such a magazine ends when the gun is sold. The new guidance will instruct law enforcement agencies to return a stolen magazine to its owner.
Magazines with removable base plates will no longer be considered readily convertible to hold extra rounds.
Kopel said issues such as more stringent background checks and limits on magazines will be addressed when the lawsuit goes to trial in December.
Suthers said he was happy with the agreement, terming it "consistent with the reasonable, narrow reading of the statute."