It will sell 150 stores and Fresh & Easy's distribution and production facilities to American investment firm Yucaipa Companies.
But Tesco admitted 50 stores were not part of the deal and would close over the coming weeks, affecting around 1000 US jobs.
About 400 full-time roles are expected to be axed across the stores that will close, with another 600 part-time or temporary workers also set to lose their jobs.
Philip Clarke, Tesco chief executive, said the sale represented "the best outcome for Tesco shareholders and Fresh & Easy's stakeholders", adding: "It offers us an orderly and efficient exit from the US market."
Tesco will loan Yucaipa Companies around £80 million to support the new business following the deal, but said that this, together with the closure of the unsold stores and other expenses, will cost it a total of £150m to draw a line under its ill-fated US venture. The deal is expected to complete within three months.
Yucaipa, founded by US supermarket billionaire Ron Burkle, has not yet decided if it will keep the Fresh & Easy brand.
Tesco confirmed recently it would quit the US after putting Fresh & Easy under review last December, having pumped more than £1 billion into the chain since its launch in 2007.