Under the agreement, Skilling's original sentence will be reduced to somewhere between 14 and 17.5 years.
The agreement still has to be approved by U.S. District Judge Sim Lake, who is set to hold a June 21 hearing in Houston to make the final decision on the length of Skilling's sentence.
Daniel Petrocelli, Skilling's attorney, says the agreement "brings certainty and finality to a long, painful process."
Justice Department spokesman Peter Carr said the agreement will allow victims of Enron's collapse to finally receive more than $40 million in restitution they are owed. The ongoing status of the case has so far prevented the government to distribute Skilling's seized assets to victims, according to the agreement.
Skilling was convicted in 2006 on 19 counts of conspiracy, securities fraud, insider trading and lying to auditors for his role in the downfall of Houston-based Enron. The company collapsed into bankruptcy in 2001 under the weight of years of illicit business deals and accounting tricks.
Skilling has been in prison since December 2006 and is serving his sentence in a low security facility outside of Denver.
An appeals court in 2009 upheld his convictions but vacated his more than 24-year prison term and ordered that he be resentenced, saying a sentencing guideline was improperly applied, resulting in a longer prison term.
The U.S. Supreme Court said in 2010 that one of his convictions was flawed when it sharply curtailed the use of the "honest services" fraud law, and told a lower court to decide whether he deserved a new trial. The lower court said no.
Skilling, 59, was the highest-ranking executive to be punished for Enron's downfall. Enron founder Kenneth Lay's similar convictions were vacated after he died of heart disease less than two months after trial.
Enron's collapse put more than 5,000 people out of work, wiped out more than $2 billion in employee pensions and rendered worthless $60 billion in Enron stock. Its aftershocks were felt across the city and the energy industry.
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