City officials and representatives with the Amalgamated Transit Union Local 1505 sat down with a conciliator and negotiated for nearly 11 hours Friday before striking the deal.
The agreement must still be ratified by the union membership and city council.
Until it is, the union has lifted its ban on voluntary overtime.
The two sides were at odds over wage increases as they negotiated for a new contract.
Winnipeg Transit director Dave Wardrop told a news conference that he's pleased everyone can get back to business.
"We're excited and I think ATU are happy with the outcome," Wardrop said Saturday. "We've all worked very well and hard to come up with a good deal for everybody. We've all worked very hard to listen and work with each other."
John Callahan, the president of the union local, said he's not sure when regular service will be restored.
"I know the guys in the garage have a lot of work ahead, but they're committed to getting the service back to where it needs to be," Callahan told CJOB radio.
The city said in a news release that Winnipeg Transit expects to return to normal service soon, once it deals with a backlog of bus maintenance.
The union, which has been in a legal strike position, announced in late April that its members would refuse overtime.
Callahan said at the time that up to 30 runs per day are done by drivers on overtime.
The city warned when the action was announced that some buses might not show up on schedule, and service on some routes could be cancelled.
Winnipeg Transit employs approximately 1,100 bus operators and about 250 maintenance staff.