The agreement, dubbed "alliance stability covenant", caps the government's ability to interfere in the affairs of the Renault-Nissan alliance in return for Nissan's stock in Renault remaining without voting rights.
The French state raised its stake in Renault to 19.7 per cent this year, disturbing the fragile balance between the two companies and angering Renault-Nissan boss Carlos Ghosn.
That bolstered Paris' voting rights, effectively denying the Japanese company a say in how the business is operated.
Under the alliance agreement struck in 1999, Renault owns about 43 percent of Nissan. The latter in turn holds about 15 percent of the French automaker's shares, but without voting rights.
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Nissan reportedly wanted the French government to cut its Renault stake back to its previous level and had threatened to raise its own stake in Renault to reassert its influence if France did not budge.
But instead, the French government has now agreed to refrain from using its newly-won voting rights power, except in "exceptional circumstances", Renault said, calling the debate leading up to the deal "fruitful".
He did, however, threaten that Nissan would not accept any future unwanted interference from Paris.
"I am not saying that from tomorrow we are going to increase the shareholdings in Renault, it is not our intent, but if there is an infringement or violation Nissan has the right to increase the shareholdings," he told a video conference.
According to the deal, the French government will refrain from using its extra voting rights, except concerning dividends, government representatives on the board, any sale of more than half of Renault's assets and "interested party transactions not approved by French government representatives on the Renault board".