The Boss actor had been fighting his former partner over custody of their two children Mason and Jude since May last year, but the pair are said to have amicably reached an agreement.
A temporary arrangement had been reached in July, but the new deal is permanent, according to TMZ.
Camille will stay with the children in Los Angeles, but Kelsey will now have "meaningful contact" with them.
Sources also claim that the pair are close to solving their ongoing financial disagreements.
Kelsey recently admitted to cheating on Camille with his current Kayte Walsh after meeting in 2009.
Kayte Walsh and Kelsey Grammer recently announced that they are expecting twins later this year.