The automaker and a lawyer for VW brand dealers announced a tentative settlement at a court hearing in San Francisco. The amount of the settlement fund was not disclosed.
VW's U.S. dealers have been barred from selling polluting diesel vehicles for nearly a year.
Not all details of how the settlement fund will be divided among the dealers have been resolved. VW and the dealers told U.S. District Judge Charles Breyer they plan to file the details of the agreement by the end of September.
The German automaker has been taking a number of steps to resolve outstanding issues related to the emissions scandal.
VW has admitted it installed improper software that deactivated pollution controls on more than 11 million diesel vehicles sold worldwide. In June, it agreed to pay up to $15.3 billion to buy back up to 475,000 vehicles and address claims by federal regulators and 44 U.S. states.
The U.S. Justice Department and Environmental Protection Agency have not yet reached a deal with Volkswagen on fines as part of a separate settlement that could lead to an outside monitor overseeing VW's compliance with American laws.
VW faces potentially billions of dollars more in costs in the United States if it is forced to buy back 85,000 3.0-liter Audi, Porsche and VW cars and SUVs sold since 2009.
(Reporting by David Shepardson; Editing by Jeffrey Benkoe and Dan Grebler)