The EPA said Mercedes had failed to promptly notify it about defects in the air pollution controls installed on a number of models from 1998-2006 model years.
In response to the investigation, Mercedes began voluntary recalls for two of the defects and offered an extended warranty coverage on a third defect, at an estimated cost of about $59 million, the justice department and EPA said.
A call to a Mercedes spokeswoman was not immediately returned.
Under the terms of the deal, Mercedes will be required to improve its emissions defect investigation and reporting system, at an estimated cost of $1 million per year, according to the two agencies.
The vehicles involved in voluntary recalls and extended warranties have defective catalytic converters or defective air pumps, the two government agencies said.