The Duke and Duchess of Sussex are no longer to use their HRH titles and will repay £2.4million (NZ$4.7m) of taxpayers' money spent on renovating their Frogmore Cottage home, Buckingham Palace announced tonight, as a Megxit deal was sealed.
The Queen said in a statement: "Following many months of conversations and more recent discussions, I am pleased that together we have found a constructive and supportive way forward for my grandson and his family. Harry, Meghan and Archie will always be much-loved members of my family.
"I recognise the challenges they have experienced as a result of intense scrutiny over the last two years and support their wish for a more independent life.
"I want to thank them for all their dedicated work across this country, the Commonwealth and beyond, and am particularly proud of how Meghan has so quickly become one of the family.
"It is my whole family's hope that today's agreement allows them to start building a happy and peaceful new life."
Buckingham Palace added in a statement: "The Duke and Duchess of Sussex are grateful to Her Majesty and the Royal Family for their ongoing support as they embark on the next chapter of their lives.
"As agreed in this new arrangement, they understand that they are required to step back from royal duties, including official military appointments.
"They will no longer receive public funds for royal duties. With the Queen's blessing, the Sussexes will continue to maintain their private patronages and associations.
"While they can no longer formally represent the Queen, the Sussexes have made clear that everything they do will continue to uphold the values of Her Majesty.
"The Sussexes will not use their HRH titles as they are no longer working members of the Royal Family.
"The Duke and Duchess of Sussex have shared their wish to repay Sovereign Grant expenditure for the refurbishment of Frogmore Cottage, which will remain their UK family home.
"Buckingham Palace does not comment on the details of security arrangements. There are well established independent processes to determine the need for publicly funded security.
"This new model will take effect in the Spring of 2020."
But the official statements do leave several key questions unanswered over Harry and Meghan's future.
While it says the couple will no longer receive public cash, it is unclear whether Harry will still receive the estimated £2.3million a year he gets from his father Prince Charles's Duchy of Cornwall coffers.
And the future of the couple's new website venture is also unclear. It is not known whether they will hang on to the "Sussex Royal" name if they are no longer officially part of royal life.
Prince Harry had been forced to delay flying back to Canada to be reunited with Meghan and baby Archie because he is expected to have fresh talks on Monday after negotiations with the Palace over his future hit a stalemate.
The Queen, who wore a steely expression behind the wheel of her Land Rover at Sandringham on Saturday, had ordered courtiers to hammer out a plan "in days, not weeks" for a stripped-back Royal role for the Duke and Duchess of Sussex.
As she drove through her Norfolk estate, Her Majesty wrapped up against the winter chill in a patterned head scarf and dark glasses.
The Prince was spotted last night in the capital after spending the evening dining with friends at Brook House Pub in Fulham, west London.
Following a crunch summit between Princes Charles, William and Harry last Monday, the Queen agreed to let the Sussexes step back from official duties and tasked Palace aides with drawing up a blueprint for the couple's future in double-time.
But negotiations have since stretched on for five days because both parties are at loggerheads and unable to navigate a way through the deadlock.
Buckingham Palace has confirmed to MailOnline that Harry, who was previously believed to be digging his heels in over securing a good financial settlement, has further meetings in the UK on Monday.
This is despite his desire to return to Canada to be with Meghan and 8-month-old Archie, who he has not seen for almost two weeks.
Harry had been expected to fly back across the Atlantic this weekend after hosting the Rugby League World Cup draw at Buckingham Palace on Thursday.
The last time he saw his son was at the $14 million (NZD$27million) Vancouver Island mansion where he and Meghan spent Christmas - and Archie stayed when they returned to the UK to make their bombshell statement outlining their plan to quit as senior Royals.
And his time away from Archie will yawn into its third week, after a source told the Mirror talks had snagged and "couldn't be done" by the end of the week.
They said: "The talks have hit a deadlock. There was huge pressure to produce something for the end of the week but it couldn't be done.
"The Queen said it herself, these are complex issues and she is exactly right."
"Any announcement made in due course will be a halfway house, enough to suggest an agreement has been made between Harry, Meghan, and the rest of the family."
As well as splits between the Palace and Sussex households, friends claim that Harry and Meghan are themselves divided over where in Canada to settle down.
The Duke is believed to be happy to continue living on the west coast near Vancouver, while his ex-actress wife is understood to favour Toronto, where she lived during her time filming Suits.
"Meghan has a lot of connections here. She finds it comfortable and believes it is somewhere they can develop new roles and pursue her interests," a source told the Times.
Prince Andrew was also spotted at Sandringham today, where he is understood do have had lunch with the Queen and Prince Philip.
The Standard quoted senior palace officials who are understood to have been working to resolve the crisis "at pace".
But it is thought that talks about the couple's ability to strike big-money deals with corporate giants is adding to the delay.
It emerged today that Meghan's team pre-approved text and pictures sent out after her carefully-choreographed charity visit in Vancouver earlier this week.
The Duchess of Sussex visited feminist climate-change group Justice For Girls in Vancouver on Tuesday in one of the first times she has been seen since the Duke and Duchess of Sussex announced they were quitting as senior royals.
Her visit was publicised on the group's Twitter account but only after Meghan's team apparently gave the go-ahead, The Daily Telegraph reports.
On Friday, Meghan took full advantage of her newfound independence from the Crown as she drove herself to a Canadian airport to pick up a pilates expert pal who jetted in from the US for the weekend.
The Duchess of Sussex was spotted in photos obtained exclusively by DailyMail.com parked outside Victoria International Airport in a Land Rover Discovery on Thursday afternoon.
She appeared to be in high spirits as she chatted with a male companion in the front seat, believed to be personal security, for about 10 minutes until her friend Heather Dorak arrived.
She runs the Pilates Platinum brand, which the Duchess started attending in Los Angeles when she starred in Suits.
The friends were also both pregnant at the same time in late 2018, but their children were not with them at arrivals yesterday afternoon.
Ms Dorak, who hails from San Antonio, Texas, but lives in California, became Meghan's pilates guru and attended the royal wedding in May 2018 with her husband Matt Cohen.
Five thousand miles away in London her husband Harry made his first public appearance since the Megxit bombshell - and potentially his last engagement as a frontline royal - at the draw for the Rugby League World Cup at Buckingham Palace on Thursday.
And Harry and Meghan's staff at Frogmore Cottage are reportedly being "let go", in the surest sign yet the couple will settle permanently in Canada with the Duchess strongly rumoured never to return.
More than £2.4million of tax payers money was spent on the couple's Grade II listed house, according to royal accounts that were published last summer.