With the move, Fiat will start with a 20-per cent share of the new Chrysler Group but could increase the stake to 35 per cent as it transfers over fuel-efficient technologies.
Fiat could eventually take a majority stake once the US government is no longer involved.
Parts of the automaker outside of the deal will remain in bankruptcy to be sold or closed.
A union health care trust will hold a majority stake of 55 per cent at the start, while the US government will take eight per cent and the Canadian government two per cent.
Chrysler reached agreements with nearly all of its major creditors at the end of April and filed for bankruptcy protection on April 30, in order to complete the sale of its assets to the new company.
Chrysler had hoped to emerge from bankruptcy in record time – 30 to 60 days - as part of White House-backed efforts to rescue it from the dual devastation of the recession and years of making cars that few customers wanted to buy.
The quick bankruptcy by Chrysler could offer some hope for General Motors, its larger US rival, which declared bankruptcy on June 1.
But GM's situation is more complicated, and the White House hopes it can emerge from the process in two-to-three months.