The move makes Nissan the largest shareholder in the ailing brand, with Nissan CEO Carlos Ghosn taking the helm as CEO of Nissan and Mitsubishi. The Renault-Nissan alliance now includes Mitsubishi, and combined, Nissan claims, the three will make up one of the three largest car producing groups on the planet.
The Commission approved the move earlier this month, stating that "The European Commission has approved under the EU Merger Regulation the acquisition of Mitsubishi Motors Corporation by Nissan Motor, both of Japan."
"The Commission concluded that the proposed acquisition would raise no competition concerns, because the overlaps between the companies' activities were limited and a number of strong players would remain active in the markets concerned after the merger."
In the wake of revelations that Mitsubishi has been falsifying fuel economy data for the past 25 years, the deal will make Nissan the firm's largest single shareholder.
Nissan boss Carlos Ghosn said: "We will support Mitsubishi Motors as they address their challenges and welcome them as the newest member of our enlarged alliance family.
"This is a breakthrough transaction and a win-win for both Nissan and Mitsubishi Motors. It creates a dynamic new force in the automotive industry that will cooperate intensively, and generate sizeable synergies."
Osamu Masuko, chief executive at Mitsubishi Motors, added: "It is not an easy task to regain trust, so through the alliance with Nissan, we will be starting a path towards tackling this difficult task."
The two companies have already collaborated on several models in the past, and will both sign the share agreement within two weeks. Both companies have been contacted for further comment.
Only Japanese cars affected in scandal
Prior to the deal being struck with Nissan, Mitsubishi admitted that it has falsified test data on up to 13 different models since 1991 - all of them sold in Japan only.
No cars sold in the UK or other regions are affected by the latest fuel economy scandal. The firm has issued a letter to Mitsubishi owners, assuring them that their car is not embroiled in the fuel economy scandal.
Mitsubishi has revealed that the differences between the falsified figures and the legitimate ones are so small that the manufacturer plans to continue selling the affected cars. However, it has not specified in full which cars are affected.
Osamu Masuko, Mitsubishi’s chief executive officer, said the firm is still investigating the issues that led to the scandal. He added that it will submit more concrete details to Japan's transport ministry by 18 May.
Masuko insisted that he wouldn’t stand down as a result of the crisis. “There are various ways to take a responsibility," he said, "and I believe getting the company on a stable path is one way to do it.”
Mitsubishi confirms US cars are legal
Mitsubishi had previously responded to requests from the US Environmental Protection Agency (EPA) by saying its US-spec cars conform to legislation governing fuel test procedures.
The EPA had requested the car maker retest its vehicles following the cheating revelations, but Mitsubishi said it has found no evidence of US-market vehicles being affected. This includes all Mitsubishi models sold in the US from 2013 to the present.
External investigation and widening crisis
After news of the fuel economy scandal broke, Mitsubishi share prices plummeted by 50%. Orders for Mitsubishi vehicles in its home Japanese market also halved in the following days.
An independent committee has already been assembled to further investigate the brand. It is made up of three external lawyers, headed by committee chair Keiichi Watanabe, a previous superintending prosecutor at Tokyo High Prosecutors Office. The two remaining committee members are Yoshiro Sakata and Genta Yoshino.
Last month Mitsubishi said the committee would review related documents and data and interview all people suspected of being involved. Once the investigation is complete, the committee will be responsible for drafting up measures to prevent a recurrence.
Previously, Japanese media had reported that alongside the 625,000 local cars already affected, other models involved could include the i-MiEV electric car, which is sold in the UK, but today's news quells these allegations. The car maker is also suspected of using non-Japanese testing processes on the iRVR, Pajero and Outlander models, although the issue is only related to cars sold in Japan.
How the Mitsubishi fuel economy scandal unfolded
News for the case first broke when Mitsubishi admitted to rigging fuel tests in the middle of April, when it said around 625,000 Mitsubishi-made cars could be affected, including vehicles produced for Nissan.
The models initially named were four superminis: the Mitsubishi eK Wagon and eK Space, and the Nissan Dayz and Dayz Roox.
All four models are 'kei' cars - models with small-capacity engines and compact dimensions, which are extremely popular in Asia. Of the 625,000 affected, 468,000 units are Nissan models, while 157,000 are Mitsubishis.
Mitsubishi said it had "conducted testing improperly to present better fuel consumption rates than the actual rates, and that the testing method was also different from the one required by Japanese law". It added: "We express deep apologies to all of our customers and stakeholders for this issue."