Under the agreement, BP will acquire the remaining 50.03% stake in Lightsource BP from the company's founders, management, and staff at a base equity value of 254 million pounds ($322 million).
The acquisition of the fast-growing solar developer will underpin BP's planned growth in low-carbon and biofuels production, as well as electric vehicle charging, as part of its energy transition strategy.
It comes as BP continues its search for a permanent CEO after Bernard Looney resigned in September after failing to disclose relationships with employees.
"This is a natural evolution of the partnership we have built over the past six years - now we will be able to take Lightsource BP to the next level of profitable growth and performance," said Anja-Isabel Dotzenrath, BP's head of gas and low-carbon energy.
BP shares were up 2.2% by 0933 GMT.
Reuters first reported that BP was considering buying out Lightsource's remaining stake in March.
London-based Lightsource BP was founded in 2010 by its Chief Executive officer Nick Boyle, who holds the majority of the outstanding 50% stake, and is today one of the world's top developers of solar photovoltaic projects.
Since its founding, Lightsource has expanded from operating in three countries to 19, developed 8.4 gigawatt of solar capacity and built a 61 gigawatt development pipeline. It has over 1,200 personnel.
Lightsource BP reported underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) of 287 million pounds in 2022 with adjusted debt of £1.5 billion.
The shareholders selling their stake will also have the opportunity to receive further payment over time, dependent on the company's performance.
BP's Joaquin Oliveira, currently head of finances for gas and low carbon energy, will take the role of co-CEO of Lightsource BP in early 2024 along with founder Boyle.
