The transfer ban imposed on Chelsea by FIFA has been lifted after the Premier League club reached an agreement with French club Racing Lens over Gael Kakuta, the Court of Arbitration for Sport (CAS) said on Thursday.
Chelsea were barred by the world governing body in September from signing new players until 2011 after being found guilty of inducing Kakuta, 18, to break his contract with Lens in 2007.
The club appealed and were cleared to sign new players in January's transfer window pending a final decision by CAS, which was handed down on Thursday when Chelsea were cleared.
"The Court of Arbitration for Sport has issued an award today ratifying the agreement reached by Chelsea FC, Racing Club de Lens and the French football player Gael Kakuta," CAS said.
"The CAS has noted that, in the agreement, the two clubs and the player have recognised that the contract between the player and RC Lens was not valid.
"Accordingly, the player could not have terminated it prematurely and without just cause and FC Chelsea cannot therefore be liable for inducing a breach of contract," it added in a statement.
"As a consequence, in light of these new circumstances, the sanctions imposed upon Chelsea FC and the player by the FIFA Dispute Resolution Chamber had to be lifted."
Chelsea have decided, however, that they will still give Lens 130,000 euros (113,420 pounds) in compensation towards the costs of developing the player, which the west London club had been ordered to pay by FIFA in September.
"In an act of good faith and with a view to the possibility of future collaboration with Lens, and without recognising any liability, Chelsea has agreed to pay compensation costs for the training given to the player while at Lens, as mandated by FIFA in its original ruling," Chelsea chairman Bruce Buck said.
"We are pleased to have come to an amicable resolution of the matter and that it has been ratified by CAS and recognised by FIFA," he added on the club's website (www.chelseafc.com).
"It was always our intention to work together with Lens to reach this end, and both clubs have strengthened their relationship as a result of resolving this case to everyone's satisfaction."
Ligue 1 club Lens said in a statement they were pleased with the agreement "financially and technically."
"RC Lens have steadily worked to reach an agreement between all parties and this decision gives us recognition for the quality of our youth academy and it offers the possibility to have a technical cooperation with one of the greatest European clubs," the French club said on their website (www.rclens.fr).
Kakuta will also be delighted with the outcome, having been originally ordered to pay 780,000 euros compensation which FIFA said Chelsea were "jointly liable" for, while also receiving a four-month ban from competitive matches.
A France under-19 international, he had been at Lens since he was eight and went through their schooling system.
"RC Lens wishes Gael Kakuta the best and longest possible career with Chelsea," the French club added.