The long-running stand-off in golf ended on Tuesday as the PGA Tour, European Tour and Saudi-backed LIV Golf circuit announced a landmark agreement to merge and form a commercial entity to unify golf.

“After two years of disruption and distraction, this is a historic day for the game we all know and love,” PGA Tour Commissioner Jay Monahan said in a joint media release.

“This transformational partnership recognises the immeasurable strength of the PGA Tours history, legacy and pro-competitive model and combines with it the DP World Tour and LIV - including the team golf concept - to create an organisation that will benefit golfs players, commercial and charitable partners and fans.”

As part of the deal, the sides are dropping all lawsuits involving LIV Golf against each other effective immediately.

The announcement comes after a year of immense disruption in the mens professional game following the launch of LIV Golf circuit.

PIF, Saudis sovereign wealth fund, will make capital investment into the combined entity as part of the agreement. The wealth fund will initially be the exclusive investor in the new entity and have the right of first refusal on any capital to be invested.

The tours also said in their announcement that players who were suspended by the PGA Tour or the DP World Tour for playing in LIV Golf events could return as the entities “will work cooperatively and in good faith to establish a fair and objective process for any players who desire to re-apply for membership”.

PIF governor Yasir Al Rumayyan said it was a great day for the sport.

Awesome day today https://t.co/qUwVJiydym

“Today is a very exciting day for this special game and the people it touches around the world,” Al Rumayyan said. “We are proud to partner with the PGA Tour to leverage PIF’s unparalleled success and track record of unlocking value and bringing innovation and global best practices to business and sectors worldwide.

“There is no question that the LIV model has been positively transformative for golf. We believe there are opportunities for the game to evolve while also maintaining its storied history and tradition.”

LIV Golf was launched in October 2021 and lured top PGA Tour talent with record $25 million purses and money guarantees.

The PGA Tour responded to the emergence of a rival tour by banning LIV players while the DP World Tour handed out heavy fines. It led to a series of lawsuits and breakdown of relations between players.

Among those who moved to the new circuit were golf great Phil Mickelson, former world No 1 Dustin Johnson, reigning PGA Championship winner Brooks Koepka and 2022 British Open winner Cameron Smith.

A rise in fines and suspensions prompted players like Lee Westwood, Sergio Garcia, Ian Poulter and Henrik Stenson to resign their memberships and become ineligible for the Ryder Cup. Those players could now return to the fold.

Dustin Johnson watches a tee shot during the first round of the Portland Invitational LIV Golf tournament in North Plains, Oregon. AP

Keith Pelley, chief executive of the DP World Tour, said “This is a momentous day. We are delighted to be able to not only reignite our relationship with PIF, but also to have the opportunity to build on our current strategic alliance partnership with the PGA Tour.”

The PGA Tour will appoint a majority of the board and hold a majority voting interest in the newly formed entity, with PIF governor Al Rumayyan the chairman and Monahan the chief executive.

There was noticeably no mention of LIV chief executive Greg Norman in the statements. The Australians combative approach to the conflict had annoyed some in the sport.

In November, Rory McIlroy, who was the most prominent backer of the PGA Tour among the players, said that Norman was an obstacle to any deal between the two parties.

“I think Greg needs to go. I think he just needs to exit stage left,” said the Northern Irishman, “No one is going to talk unless theres an adult in the room that can actually try to mend fences.”

It was unclear if the announcement would impact on LIVs current season. The tours next event is on June 30 in Spain. The PGA Tour statement said that the team element, introduced by LIV, would be part of the future plans.