Tesco has been hit with a £129m (€150m) fine from the Serious Fraud Office (SFO), but has escaped prosecution over its accounting scandal.
The supermarket giant said its subsidiary - Tesco Stores - has reached a Deferred Prosecution Agreement with the SFO following a two-year investigation into false accounting at the firm.
The move means Britain's biggest supermarket will escape prosecution as long as it "fulfils certain requirements", including paying a hefty penalty.
The announcement came as the financial watchdog found that Tesco had committed market abuse when it inflated profits by £263m - later revised up to £326m - in a trading update on August 29 2014.
In an unprecedented move, the Financial Conduct Authority said it had forced the supermarket to compensate investors who had bought shares and bonds on - or after - August 29 and had held the securities when the statement was later corrected on September 22 2014.
Tesco chief executive Dave Lewis said: "Over the last two-and-a-half years, we have fully co-operated with this investigation into historic accounting practices, while at the same time fundamentally transforming our business.
"We sincerely regret the issues which occurred in 2014 and we are committed to doing everything we can to continue to restore trust in our business and brand."
Tesco, which will face no further penalty from the FCA, said the compensation bill for investors was expected to reach around £85m and will be overseen by accountancy giant KPMG.
It said each net buyer of shares over the period will be entitled to 24.5p per share purchased, alongside interest of 1.25pc per year if the buyer is an institutional investor and 4pc per year if the buyer is a retail investor.
The interest period runs from September 19 2014 to around four months after the scheme opened.
The penalty, compensation scheme and costs will lead to an exceptional charge of £235m which will be booked in its annual results on April 12.
Despite the compensation agreement, Tesco said the FCA had "expressly stated" that it was not suggesting the Tesco board of directors "knew, or could reasonably be expected to have known" that information in the trading statement was false or misleading.
FCA chief executive Andrew Bailey said: "Dissemination of information that gives a false or misleading impression as to traded securities harms the integrity of our markets.
"The FCA is committed to UK markets being fair, transparent and thus competitive.
"Tesco and its board are doing the right thing here, taking appropriate responsibility and agreeing to rectify the consequences of the misconduct.
"They have co-operated fully with us and this sets a good example for the market and so is a good outcome for Tesco and investors."