The new agreement, which has been approved by the Northern Ireland Department for Finance and Personnel, will protect pensions for all workers aged 47 and over.
NI Water staff will also be awarded a pay increase of at least 4 per cent, which the company said it could afford to give staff as a result of efficiency savings within the business.
In a statement, NI Water said: “NI Water can confirm the unions have agreed to formally end the industrial dispute following a ballot of their members.
“The pension protections that were on offer prior to the commencement of industrial action have now been implemented and the pay award in excess of the pay cap is linked to efficiency gains and changes in working practices.
“This reflects the efficiency gains delivered by NI Water, with annual operating costs today £60 million lower compared to 2009.”
The dispute started at the end of 2014, when union members began industrial action, when more than 1,000 members of staff, who are members of the GMB, NIPSA and Unite trade unions, withdrew from working overtime and refused to provide on-call services.
Action was escalated following the Christmas and New Year holidays, when union members withdrew from a goodwill arrangement which ensured that any incidents that posed a risk to public health or vulnerable consumers were dealt with.
An initial pay offer was rejected on 12 January, but the trade unions suspended the industrial action ten days later while a new deal was considered by their members.
More than 10,000 properties had their water supplies disrupted during the industrial action over the winter, and in February NI Water chief executive Sara Venning apologised to customers for the “severe disruption” caused.