The BBC reported that the teams voted to lower the budget cap to be introduced in 2021 by US$30 million to $145mn (B4.6 trillion).
This will be reduced again to $140m in 2022 and $135m for the period 2023-25.
Other measures were also agreed, said the report, including a research-and-development handicap system.
The agreement still needs to be officially approved by the world motorsport council of governing body the FIA next week.
Initially, a spending cap of $175 million was set to be introduced next year in a bid to help even up the competition although that was before international sport was halted by the global pandemic.
“It has become very clear, from talking to the management of the teams. The message is clear. We’ve got to cut costs and have a reduction of the cost cap... If we lose some teams in this period it would be a tragedy,” F1’s managing director Ross Brawn said.
“There is going to be a much more equitable prize fund in the new agreement. The midfield teams in particular are going to be much better off in terms of their proportion of the prize money.
“So a good midfield team should be able to score podiums, maybe a win, and should be able to show a small profit. If we can achieve that we should have a very sustainable future.”
Meanwhile, two proposed British Grands Prix could be moved into August if it means the UK government do not insist on a 14-day quarantine period, according to Silverstone managing director Stuart Pringle.
Plans for two races at the English track were thrown into turmoil when the government offered no exemption to elite sport in its plan to introduce a two-week isolation period for arrivals into the country from June 8.
F1 organisers are aiming to start the season with the Austrian Grand Prix on July 5 behind closed doors, followed by a second race at the Red Bull Ring a week later.
It was hoped Silverstone could then host two races in back-to-back weekends, also without spectators.
“We have got our original dates in mid-to-late July but we have got a degree of flexibility in August. I don’t think it will be a problem finding dates for two races,” Pringle told Sky Sports.
“What we need is the green light from government and that will take time. Formula One as a championship needs that exemption.
“For Silverstone we can probably move into August with our dates but it is essential there is clarity on the quarantine situation ahead of that.”
Should no exemption be granted, the quarantine measures could have a huge impact on the rest of the F1 season as seven of the 10 teams on the Formula One grid have bases in England.
Pringle, though, remains confident a breakthrough will be found in the coming weeks.
“We are still liaising with government but I am encouraged that there is progress. It will take a few weeks for the way to become clear but it definitely feels we are moving in the right direction.”