Newcastle placed the 53-year-old on gardening leave over four months ago after he informed the club of his desire to join Sir Jim Ratcliffe's new-look hierarchy at Old Trafford.
United appeared at risk of having to wait until 2025 to welcome Ashworth to their INEOS structure as the Magpies demanded £20million to release him early.
But a sudden agreement between the two clubs at the start of July represents a significant boost to United's summer transfer plans.
A joint statement read: "Newcastle United and Manchester United have reached an agreement for the immediate release of Dan Ashworth from his contractual obligations at Newcastle United.
"The terms of this agreement remain confidential between the clubs. Newcastle United thanks Dan for his services and wishes him well for the future."
And the M16 giants have reportedly sealed a coup as a result of Newcastle's mounting pressure to adhere to the Premier League's Profit and Sustainability Rules.
According to The Sun, United managed to lure Ashworth from St. James' Park for less than half of his mooted £20m asking price.
Dan Ashworth is Man Utd's new sporting director. (Image: Getty)
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Newcastle are said to have dramatically slashed their valuation in an 11th-hour move to avoid a points deduction for a financial breach next season.
Under PSR rules, Premier League clubs are allowed to lose up to £105m across a three-year period, and Newcastle were among those at risk.
The Tyneside outfit were handed a £70m boost last week through the sales of Yankuba Minteh and Elliot Anderson to Brighton and Hove Albion and Nottingham Forest, respectively.
But they also reignited talks over Ashworth after signalling to United that they were open to performing a U-turn on their stubborn stance.
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Newcastle had previously rejected a £3m compensation offer for Ashworth's services. It's unclear whether his eventual fee stooped that low due to the considerable financial pressure.
The former FA, West Bromwich Albion, and Brighton and Hove Albion chief joins technical director Jason Wilcox as INEOS' new recruitment team at Old Trafford.
Incoming chief executive Omar Berrada will start work on July 13 when he completes his gardening leave at Manchester City.
The trio will oversee football decisions in United's new era under Ratcliffe and INEOS' control, starting this summer.
