Nokia said on Tuesday it would receive an upfront cash payment and additional revenues from Apple starting from the current quarter. It did not give details of the amounts.
Nokia shares, which fell in December due to the patent dispute, jumped 7.4 percent to 5.93 euros by 0717 GMT.
Analysts said they had expected the legal dispute to drag on and were surprised by the relatively quick resolution.
"(The agreement) moves our relationship with Apple from being adversaries in court to business partners," Nokia's Chief Legal Officer Maria Varsellona said in a statement.
A previous patent license contract between the companies expired last year and both sides took legal action in December. Nokia accused Apple of violating technology patents and Apple complained of being overcharged.
In December, Nokia cut its annual run-rate forecast for patent and brand licensing sales to about 800 million euros ($900 million) from 950 million euros, in the absence of a new Apple deal. In its last quarterly report, Nokia stopped giving an annual run-rate forecast.
"For Nokia, it's good news they got this out of the way, but we still have to wait for details about the financial impact," said OP Equities analyst Hannu Rauhala.
"The previous annual rate was 150 million euros, so I assume this to be more, around 500 million euros."
Under the new business agreement, Nokia said it would provide network infrastructure products and services to Apple while Apple would resume carrying Nokia's digital health products in its retail and online stores. The firms will also look into further collaboration in digital health, Nokia said.