"We have signed a new five-year collective bargaining agreement," MLS commissioner Don Garber told a teleconference on Saturday.
Players had voted to strike if a deal was not reached by midnight on Tuesday but the regular season will now go ahead as planned.
The season gets underway with Seattle Sounders hosting new team Philadelphia Union on Thursday.
"This is a great way for MLS to start its 15th season," said Garber, who had been locked in negotiations until late at night with the union and a federal mediator.
MLS differs from most football leagues in being a 'single entity' where the league, rather than the clubs, own the rights to the players.
The union had wanted major changes to that structure which it had called a cartel that restricted freedom of movement.
"Rights were our central theme all along. I think the deal reaches our joint goal of increasing player rights and compensation while keeping a strong eye on the bottom line," said union executive director Bob Foose.
Garber, who said the game was still at a "nascent stage" in North America, added the 'single entity' structure was not changed by the agreement.
RE-ENTRY DRAFT
"That system will remain in place, it is not the system that is of importance to the league but how it enables us to manage our business," he said.
Garber said there would be no internal bidding between teams for players who were out of contract but that a new "re-entry draft" would allow out of contract players, beyond a certain age, to move to other clubs.
Foose said the union had not reached their goal on free agency but had seen some movement.
"We made progress, not maybe as much as we would have chosen, but that is collective bargaining," he said.
The deal will see salary increases although neither the league nor the union divulged figures.
"Player compensation improved significantly and that is a very important thing," said Foose.
Salaries for young, developmental players were as low as $20,100 last season, according to numbers provided by the union.
U.S. and Los Angeles Galaxy midfielder Landon Donovan hoped the deal would herald a fresh relationship between the players and their employers.
"Our players fight for what they believe in," said Donovan, who has just returned from a loan spell with English Premier League Everton.
"I think it has been a very productive few weeks, we are excited that we get to play soccer ... this is the start of many good things to come for our league."
