Prince Harry and Meghan will no longer be referred to as Royal Highnesses and will be "required to step back from royal duties".
It has also been revealed by the palace that the couple will also pay back the £2.4 million of taxpayers' money used to refurbish their Windsor home, Frogmore Cottage.
A statement released by Queen Elizabeth said the transition will take effect in the spring of 2020.
" "Following many months of conversations and more recent discussions, I am pleased that together we have found a constructive and supportive way forward for my grandson and his family. Harry, Meghan and Archie will always be much loved members of my family," her statement read.
" I recognise the challenges they have experienced as a result of intense scrutiny over the last two years and support their wish for a more independent life.
"I want to thank them for all their dedicated work across this country, the Commonwealth and beyond, and am particularly proud of how Meghan has so quickly become one of the family. It is my whole family's hope that today's agreement allows them to start building a happy and peaceful new life."
The couple had shocked the world when they announced they wanted to step back as "senior" members of the royal family.
Walt Disney's movie studio has postponed the release of the next two installments in Marvel's blockbuster "Avengers" series, the company said on Thursday.
Formula One drivers declared Brad Pitt's new F1 movie a winner that would bring fresh fans to the sport after being given an exclusive pre-release screening at the Monaco Grand Prix.
WikiLeaks founder Julian Assange, who is at the Cannes Film Festival for the documentary "The Six Billion Dollar Man," is assessing how to become politically active again once he has recovered from prison, said his wife, Stella.
Award-winning actor Scarlett Johansson's directorial debut at the Cannes Film Festival is a story she hopes will challenge audiences to reconsider their perspectives on forgiveness and empathy, she told Reuters.
Jodie Foster prefers to be outside the United States right now, the Oscar-winning actor told Reuters at the Cannes Film Festival, citing better conditions in Europe's film industry as well as more freedom now that her children have grown up.
The UAE has joined 80 countries in urging stronger protection for civilians in armed conflicts, following a UN Security Council debate on rising violations of international humanitarian law.