Representatives from the Canadian Union of Public Employees came to an agreement after spending the entire day at the bargaining table, following a 72-hour strike notice issued by the union Saturday.
CUPE spokesperson Gary Campbell said the discussions became very intense.
"It came down to the crunch, we stayed at the table, and we were able to hammer out a deal," he said.
"Everybody's happy that we were able to come to an agreement and not have any more job action."
The city's 500 unionized workers had been without a contract since 2012 and walked out on the job for a one-day strike in December.
Campbell said no details of the new agreement could be released until it has been ratified. CUPE members will vote on whether to accept the deal on Thursday. It will also need to be approved by Prince George city council.