Prince Harry and Meghan will no longer use their HRH titles and will not receive public funds for royal duties, Buckingham Palace has announced.
HRH, an abbreviation of His/Her Royal Highness, is used as part of the title of some members of the royal family.
The couple will also no longer formally represent the Queen.
The Duke and Duchess of Sussex intend to repay £2.4m of taxpayer money for the refurbishment of Frogmore Cottage, which will remain their UK family home, the statement added.
The new arrangement comes into effect in spring this year, the palace said.
The statement comes after the Queen held talks with the couple on Monday about their future, following their announcement that they wanted to “step back” as senior royals and divide their time between the UK and Canada.
The Queen said following “many months of conversations and more recent discussions” she was “pleased that together we have found a constructive and supportive way forward for my grandson and his family”.
“Harry, Meghan and Archie will always be much loved members of my family,” the statement continued.
She thanked them for their “dedicated work”, adding that she was “particularly proud of how Meghan has so quickly become one of the family.”
On Sunday, the Queen made her first public appearance since the announcement, arriving at church with the Duke of York.
In a separate statement, Buckingham Palace said: “The Sussexes will not use their HRH titles as they are no longer working members of the Royal Family.”
As well as repaying the cost of refurbishing Frogmore Cottage, the couple will pay a “commercial rent” for the property.
Buckingham Palace said the duke and duchess understood they were required to withdraw from royal duties, including official military appointments.
“While they can no longer formally represent the Queen, the Sussexes have made clear that everything they do will continue to uphold the values of Her Majesty,” it said.
The statement added that the pair would continue to maintain their private patronages and associations.
Earlier this month, Harry and Meghan said they wanted to create a “progressive new role” within the institution, where they would be financially independent and divide their time between the UK and North America.
Last year, they both spoke about the difficulties of royal life and media attention.
The duke said he feared his wife would fall victim to “the same powerful forces” that led to his mother’s death.
A legal case against the Mail on Sunday for publishing what the duchess says was a private letter has also raised the prospect of her father testifying against her.