NBC reaches a 'resolution' on Conan, announces Jay Leno is back on 'Tonight' March 1

Ending one of the ugliest chapters in NBC's storied history, the Peacock officially announced today that it has reached an agreement with Conan O'Brien, who has agreed to abdicate his role as the host of The Tonight Show by Jan. 22 in exchange for a large cash payout that sources place at more than $40 million — some of which will go toward severance for his staff — and the promise not to seek employment elsewhere until after Sept. 1. At the same time, Jay Leno, whose failed primetime show was canceled earlier this month, will return to The Tonight Show on March 1, when job one will no doubt be to restore the franchise's dwindling ratings: O'Brien just ushered in the Tonight Show's worst November-sweeps performance since 1993 (a staggering 52 percent loss among viewers versus the same month last year). Late Night with Jimmy Fallon will continue at 12:35 a.m.

NBC released this statement today: "NBC and Conan O'Brien have reached a resolution of the issues surrounding O'Brien's contract to host The Tonight Show with Conan O'Brien. Under terms of an agreement that was signed earlier today, NBC and O'Brien will settle their contractual obligations and the network will release O'Brien from his contract, freeing him to pursue other opportunities after Sept. 1, 2010."

As for Leno's return to the post that helped him to earn the title of King of Late Night, NBC Entertainment Chairman Jeff Gaspin released this statement: "We're pleased that Jay is returning to host the franchise that he helmed brilliantly and successfully for many years. He is an enormous talent, a consummate professional and one of the hardest-working performers on TV."

For at least next week, reruns of The Tonight Show with O'Brien will air.

The announcement marks the end of a nasty negotiation that has captivated the media and late night fans, many of whom rallied to O'Brien's defense as NBC desperately tried to negotiate a resolution to the brouhaha. As "I'm With Coco" campaigns surfaced on the internet, O'Brien's resolve only got stronger with the release of his lengthy manifesto about The Tonight Show legacy and how "I cannot participate in what I honestly believe is its destruction." By that time, no one in Hollywood believed that O'Brien would agree to NBC's request that he agree to host The Tonight Show at 12:05 p.m. behind a half-hour version of The Jay Leno Show at 11:35 p.m. The only questions left were over much money NBC would give O'Brien to leave, and how soon he'd be able to snag a new job once he left NBC.

Ironically, the ongoing tug-a-war reinvigorated the late night landscape, with every host — from O'Brien to David Letterman and Craig Ferguson — weighing in nightly with jabs about mismanagement at NBC.

More on EW.com today:

Letterman and Leno insults get personal

Stephen Colbert jokes about smoke signals with Dick Ebersol