Pixar is a privately held company headed by Apple chief executive Steve Jobs, who owns about half of all Pixar stock.
Jobs will join Disney's board of directors when the deal goes through and become the largest individual Disney shareholder.
The deal will see the current leader in computer animation joining forces with the studio credited with popularising full-length animation when it was first created.
"Disney and Pixar can now collaborate without the barriers that come from two different companies with two different sets of shareholders," said Jobs.
"Now everyone can focus on what is most important: creating innovative stories, characters and films that delight millions of people around the world. "
Pixar has created box office hits such as The Incredibles and Finding Nemo. The two firms have a long-established relationship that began with the release of Toy Story in 1995, for which Disney acted as distributor.
The partnership was set to end after the release of the upcoming movie Cars which is set for release on 9 June 2006. The break-up was announced in January 2004.
The two animation divisions will be merged and headed up by Pixar president Ed Catmull. Pixar executive vice president John Lasseter will become chief creative officer at Disney.
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