By Sarah Kent and Daniel Gilbert 

LONDON-- BP PLC on Thursday agreed to pay $18.7 billion to settle all federal and state claims arising from the 2010 Deepwater Horizon oil spill, ending most litigation stemming from the deadly accident with what federal authorities called the biggest settlement ever with a corporation.

The settlement, to be paid out over 18 years, ends five years of uncertainty for the U.K. oil giant, which has already taken charges for more than $40 billion in legal and cleanup fees for the Gulf of Mexico disaster, which killed 11 workers after a deep water oil well blew out. The spill leaked millions of barrels of crude into the Gulf and coated hundreds of miles of sensitive beaches, marshes and mangroves.

BP said the agreement involved the states of Alabama, Florida, Mississippi, Louisiana and Texas as well as claims made by 400 local government entities. As part of the deal, BP agreed to pay a civil penalty of $5.5 billion under the U.S. Clean Water Act, payable over 15 years--the largest fine ever imposed under that statute. The company also agreed to pay $7.1 billion to the U.S. and five Gulf states over 15 years, and $4.9 billion to be paid over 18 years to settle economic and other claims made by the five Gulf states.

BP's also agreed to set aside an additional $232 million to cover any further natural resource damage at the end of the 15-year period and will pay up to $1 billion to settle claims made by more than 400 local government entities.

The company said payments would be made at a rate of around $1.1 billion a year for the bulk of the payment period.

The settlement brings BP's total tab for the spill to $53.8 billion, more than its combined profits since 2012.

The Justice Department hailed the BP settlement as the largest settlement ever struck with a corporation. U.S. Attorney General Loretta Lynch said the payment "would justly and comprehensively address outstanding federal and state claims, including Clean Water Act civil penalties and natural resource damages."

If the deal is ultimately approved by a judge, Ms. Lynch said it would "help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come."

BP's lawyers had fought the litigation, arguing the company should pay no more than $2 billion and offering evidence that its massive cleanup effort helped avert an environmental calamity and diminished its ability to pay a big fine.

On Thursday, BP Chairman Carl-Henric Svanberg said in a news release that the agreement provides "a path to closure for BP and the Gulf."

"It resolves the company's largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved," he said.

Shares in BP climbed 4% after the announcement, gaining 20 pence to trade at 439 pence in early afternoon trading in London.

The Clean Water Act settlement is a much smaller fine than the $13.7 billion maximum penalty a judge could have levied against the company, but still larger than the $3.5 billion BP had set aside to pay for Clean Water Act liabilities.

However, the settlement is far from the end of the litigation over the Deepwater Horizon spill--there are still remaining shareholder lawsuits.

Justin Scheck, Ed Ballard and Devlin Barrett contributed to this article.

Write to Sarah Kent at sarah.kent@wsj.com and Daniel Gilbert at daniel.gilbert@wsj.com

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