Following more than a year of bitter fighting, the former couple have agreed on how their 21-month-old daughter Lucia will be cared for although the exact terms and conditions are yet to be released.

Everything will be finalized at a hearing this Wednesday.

A statement released by the Information Office of the Los Angeles Superior Court on Friday night said: “As the result of a multi-day settlement conference, the Court announces that Mel Gibson and Oksana Grigorieva have achieved a settlement in their ongoing dispute.

"The terms and conditions of the settlement will be set for hearing on Wednesday August 31, 2011 … Matters concerning the civil financial agreement will be heard in open court before Judge Peter D. Lichtman. Custody issues will be heard in a closed session.”

Mel – who has seven children with his ex-wife Robyn Moore – was believed to be demanding a completely equal custody arrangement before this announcement was made.

Since they split in June 2010, Mel and Oksana have been at war with each other with the Russian-born beauty making allegations of domestic abuse.

Earlier this year, the 55-year-old star agreed to plead no contest to simple battery relating to an argument he had with Oksana, 41, in January 2010, a lesser charge than corporal injury on a spouse, which he was originally facing.

While Mel felt he was in a strong position to win, his lawyer, Blair Berk, said he accepted the plea to escape a long court fight.