VW will pay 4.46bn euros ($5.6bn; £3.6bn) plus one VW common share to acquire the stake.
The two firms had agreed in 2009 to merge by the end of 2011, but have since faced legal obstacles.
The deal is likely to reduce costs and boost VW’s earnings as it seeks to become the world’s biggest carmaker.
“The accelerated integration will allow us to start implementing a joint strategy for Porsche’s automotive business more quickly and to realise key joint projects more rapidly,” said Hans Dieter Poetsch, chief financial officer of Volkswagen.
CONTINUED at BBC News.