Sony will get a $40m (pounds 25m) "signing off" fee for Michael, plus the right to release a George Michael/Wham! greatest hits album next year which will generate at least $30m. The record company has also won the right to 4 per cent of profits on future releases.
The whole deal is estimated to be worth $100m. Sony will also keep all rights to the George Michael back catalogue.
As predicted in the Independent two months ago, Michael will move to a new company, Dreamworks, set up in the United States by the film director Steven Spielberg and the record industry mogul David Geffen. He will be represented in Europe and the rest of the world by Virgin Records.
Sony Music refused to comment yesterday. But sources involved in the deal confirmed the $100m agreement.
It represents a major coup for Sony. As Michael has vowed never to record for them again, they could have been looking at a very meagre return for their star over the coming year. Instead, they have negotiated a high price for him and the right to release a greatest hits package next year to coincide with the 10th anniversary of the break-up of Wham!, the duo that launched George Michael's career.
Two years ago, Michael issued a writ against Sony alleging his contract was restrictive, but he lost a bitter battle in the High Court in London when the judge ruled the contract was "reasonable and fair". That case was estimated to have cost pounds 7m, and Michael, whose most recent album came out in 1990, said he would never again record for Sony.
The final parts of the deal are still being negotiated by Michael's lawyers in New York. No one involved would make any official comment. But sources confirmed that the $100m package - a figure that has been a closely guarded secret - was correct, and that George Michael would issue a statement shortly to confirm he was leaving his record company.
The $40m buy-out of Michael's contract is understood to have been the idea of Dreamworks, which is launching TV and film productions as well as signing recording artists.
Its joint head, David Geffen, has a history of signing established stars. In the Seventies he signed Joni Mitchell and, briefly, Bob Dylan, to his Asylum Records label.
Virgin Records in London, no longer a part of the Richard Branson empire, is also signing big names. It has the Rolling Stones on its roster, and last month signed up David Bowie.