Bushmills will transfer to Mexico’s largest tequila producer Jose Cuervo in return for an additional net payment of $408 million.
In return, Diageo will take full global ownership of Don Julio, in which it already has a 50% stake.
Curevo will also relinquish the Mexican production and distribution rights for Smirnoff.
It is the third significant move of the year in tequila for Diageo, following the acquisition of Peligroso and DeLeon in January, the latter in a joint venture with rapper Sean Combs.
Diageo lost the global distribution rights to the Jose Cuervo brand last year.
Diageo chief executive Ivan Menezes said: “We have secured our position in the growing super and ultra-premium segments of the tequila category and further strengthened our global footprint by expanding our leading position in Mexico where the growth of spirits has great potential.
“It delivers our strategy to build our presence in the world’s fastest growing markets and lead the industry in the biggest growth opportunities.”
The deal is expected to be completed in early 2015.