Sport's highest court ruled Thursday that a FIFA transfer ban on Chelsea signing players must be lifted.
The Court of Arbitration for Sport said Chelsea and French club Lens had reached an agreement in their dispute over teenager Gael Kakuta's move to England in 2007.
CAS said the clubs agreed Kakuta did not have a valid contract with Lens and so could not have breached any rules when he joined Chelsea.
"In light of these new circumstances, the sanctions imposed upon Chelsea and the player by the FIFA Dispute Resolution Chamber had to be lifted," CAS said in a statement.
FIFA had barred Chelsea from conducting any transfer business until January 2011 - through two consecutive transfer windows - though that penalty was frozen by CAS in an interim ruling until it reached a final verdict.
Chelsea chairman Bruce Buck said the clubs had reached an "amicable resolution," at the end of a case that had the potential to severely damage coach Carlo Ancelotti's squad-building plans.
"We are pleased to have come to an amicable resolution of the matter and that it has been ratified by CAS and recognized by FIFA," Buck said.
"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."
Thursday's CAS ruling also frees Chelsea of a FIFA order to pay Lens €780,000 ($1.07 million) in compensation. However, Buck said Chelsea would pay a €130,000 ($179,000) fee to Lens which had been ordered by FIFA to reimburse the French club's costs in nurturing Kakuta.
Kakuta, a France youth international, is now cleared of the threat of serving a four-month ban which had been ordered by FIFA.
FIFA's disputes panel imposed the punishments last September after Lens appealed to the governing body.
