The deal, announced jointly by Fiat and Chrysler, revives the 84-year old US carmaker that had been down to its last dollars before government intervention in late 2008.
It also completes a fast-track reorganisation for Chrysler, directed by President Obama’s administration.
Other parts of Chrysler will remain in bankruptcy to be sold or closed.
Fiat Chief Executive Sergio Marchionne became CEO of the new Chrysler Group LLC on Wednesday.
The carmaker's former CEO, Bob Nardelli, will return to Cerberus Capital, the former majority owner of Chrysler, as an adviser.
Chrysler's former vice chairman and president, Jim Press, has been named Marchionne's deputy chief executive, and Fiat's chief financial officer, Richard Palmer, has been named Chief Financial Officer of the new company.
In a memo to employees, Mr Marchionne voiced optimism about the new company's outlook.
"There is no doubt in my mind that we will get the job done," he said. He called the alliance “a bold first step to implement" lessons learned.
Mr Marchionne added that Fiat would begin the process of transferring Fiat's technology, platforms and powertrains to Chrysler plants in the next few months.
In addition to Fiat, Chrysler Group LLC is owned by a union-aligned trust and the US and Canadian governments, which have taken over the best parts of Chrysler.
The White House welcomed the completion of the deal and said the new alliance was "poised to emerge as a competitive, viable automaker."
The Canadian government said a restructured Chrysler is good for the Canadian automotive parts supply chain and for Canadian consumers.
The completion of the Chrysler sale, in roughly the time frame planned, has been seen by analysts as a good omen for the prospects of completing a similar process for General Motors, which filed for bankruptcy on June 1.
The GM sale is expected to take longer due to the size and complexity of the leading US-based carmaker. GM will be majority owned by the US government when its sale is completed.