It means sweeping new powers over income tax and welfare will be devolved to Holyrood in line with pledges made during the independence referendum after Scots voted to stay in the UK.
The Scottish Government had been stalling on a deal amid concerns over the way Scotland’s funding mechanism would operate after MSPs are made responsible for raising up to 50% of Holyrood’s spending through taxation. It was feared Scotland could lose out to the tune of billions of pounds.
Ms Sturgeon told MSPs she had struck an agreement after talks with Chancellor George Osborne on the phone earlier today.
Ms Sturgeon said: “There is now an agreement in principle that I believe we can recommend to Parliament. Draft Heads of Agreement will be published for scrutiny by Parliament by the end of this week.
“That agreement – if it is supported by this Parliament – will secure the following outcome.
“There will be not a single penny of detriment to the Scottish Government’s budget as a result of the devolution of powers during the transition period, for the next six years to March 2022.”
Ms Sturgeon insisted that the agreement is in line with the “no detriment” principle at the heart of the Smith Commission which paved the way for the Scotland Bill on more powers.
The deal comes after 10 rounds of talks between the Scottish and UK governments involving Ms Sturgeon, Mr Osborne, Prime Minister David Cameron and Scottish Deputy First Minister John Swinney.
Mr Osborne said: “Today we’ve secured a stronger Scotland in a stronger UK.
“The arrangements we’ve reached with the Scottish Government are fair to Scotland and fair to taxpayers in the rest of the UK.
“This enables us to deliver on the vow we made to the Scottish people and delivers one of the most powerful devolved parliaments in the world and the economic and national security that comes from being part of the UK.
“This clears the way for the debate in Scotland to move on to how these tax and spending powers should be used.”