A revamped World Team Cup will take place in Australia in the first week of January from 2020, the ATP said.
It comes after the International Tennis Federation set out plans for a rival 18-team end-of-season event to crown the Davis Cup champions from 2019.
In May, ATP executive chairman Chris Kermode said staging both tournaments within six weeks would be “insane”.
But on Sunday he said: “This announcement will change the landscape of the ATP World Tour.”
He added: “We believe this outcome will deliver long-term sustainability not only financially but also from a player health perspective, which is critical. This event has huge potential and we now look forward to working together with Tennis Australia in bringing our vision to fruition.”
The World Team Cup will take place in partnership with Tennis Australia and will feature 24 teams, offering £11.35m in prize money. Ranking points will also be available.
The tournament had previously taken place in Dusseldorf from 1978 to 2012.
Federations will vote at the ITF AGM in August on proposals to transform the Davis Cup, culminating in an 18-nation World Cup-style tournament at the end of the season in November.
The ATP and ITF had been in discussions to try to resolve the issue.
- Alerts: Get tennis news sent to your phone