The Newfoundland and Labrador Association of Public and Private Employees has agreed to a salary freeze for the first two years of the deal, followed by raises of two per cent and three per cent in the final two years.
The government says each full-time worker will also receive a signing bonus of $1,400 in the second year of the agreement.
Union members are expected to vote on the deal in coming weeks.
Premier Kathy Dunderdale, who has faced a barrage of criticism since the province's deficit-fighting budget last spring slashed 1,200 government jobs, said the agreement affects 17,000 workers.
"This is a good day for Newfoundland and Labrador, a good day for the government and a good day for our public servants," she said Tuesday.
Finance Minister Jerome Kennedy said the government contacted the union earlier this summer about resuming stalled talks.
"Essentially, we went back to them and said: 'We're willing to talk if you want to talk.'"
Dunderdale said she values public sector workers but that the wage offer reflects the province's fiscal situation. Her Progressive Conservative government last March forecast a deficit of $564 million this fiscal year and another deficit of $650.5 million in 2014-15 as the global economic slump cut oil and mineral earnings.
Kennedy said the general framework of the agreement will be the starting point for talks with other bargaining units such as the Canadian Union of Public Employees.