Fallows will remain a Red Bull employee until April 2, when he will be released from his contract early in order to join Aston Martin.
Aston Martin’s signing of Fallows was announced last June, but Red Bull made it clear at the time that he would not be leaving Milton Keynes until the end of his contract, which ran until 2023.
It was reported earlier this month that Red Bull had taken Fallows to court in an attempt to block him from joining Aston Martin.
However, a settlement has now been reached that will enable Fallows to link up with Aston Martin during the upcoming 2022 season.
Martin Whitmarsh, Aston Martin Group CEO, said: "We are pleased to have reached an agreement with Red Bull which releases Dan early from his contract and are looking forward to him joining the team.”
Red Bull team principal Christian Horner added: “We would like to thank Dan for his many years of excellent service and wish him well for the future.”
Fallows joined Red Bull in 2006 and was promoted to head of aerodynamics in 2014 after making a U-Turn to stay with the team rather than join rivals McLaren.
"I've enjoyed many happy years at Red Bull Racing and am proud of what we achieved,” said Fallows. “I am looking forward to next season and a new challenge."
Fallows will be joined at the Aston Martin by new engineering director Luca Furbatto, who is arriving from Alfa Romeo, as part of a shake-up of the Silverstone-based outfit’s technical department.
Current technical director Andrew Green will move into a new role of chief technical officer, while Tom McCullough will continue to be responsible for trackside engineering and performance after being handed a new title of performance director.