The two parties have "reached agreement on a path forward for the Evolved Expendable Launch Vehicle (EELV) program that improves the competitive landscape and achieves mission assurance for national security space launches," the statement reads.
"The Air Force also has expanded the number of competitive opportunities for launch services under the EELV program while honoring existing contractual obligations," the statement continued. "Going forward, the Air Force will conduct competitions consistent with the emergence of multiple certified providers. Per the settlement, SpaceX will dismiss its claims relating to the EELV block buy contract pending in the United States Court of Federal Claims."
Musk decried the sole-source deal as wasteful for taxpayers and, over the past eight months, has publicly slammed the Air Force as being too close to the legacy launch company.
In a follow-on statement, James said she was "extremely pleased" at the agreement.
"I have always been a huge proponent of competition and believe this is an important step in that direction," James said. "The Air Force is dedicated to ensuring we have the world's finest national security space architecture and a robust launch capability is at the heart of making that possible."
A spokesman for SpaceX referred queries to the joint statement. Reached for comment, a ULA spokeswoman did the same.
SpaceX expected certification to be complete before the end of 2014, but that now appears more likely to happen by midyear. James has expressed confidence the company will eventually be certified, which would allow them to launch sensitive military equipment into orbit.
Musk recently announced that his company will begin producing satellites.
Updated 1/23/15: This story has been updated with a statement from Air Force Secretary Deborah Lee James
Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.