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.