Diageo said it and Ketel owner, the Nolet family, had completed their agreement to set up a 50-50 joint venture for the premium vodka brand.
The announcement follows a green light from US competition authorities last week.
"This transaction further enhances Diageoís platform in the fast-growing super-premium vodka segment," said Diageo chief executive Paul Walsh.
Ketel One sells 1.9m cases annually, though mainly in the US. OLN understands Diageo will look to expand the brandís presence in other markets, and possibly the UK.
The group chose Ketel One over a bid for Absolut vodka owner Vin & Sprit, recently acquired by Pernod Ricard.