Employees at sites in Wolfsburg, Brunswick, Hanover, Salzgitter, Emden and Kassel will receive a 3.4-percent pay increase from September 1, followed by a further 2.2 percent from July 1, 2014, the carmaker and union said in separate statements.
IG Metall had demanded a 5.5-percent pay increase for a 12-month period.
The deal is based on a much wider industry-wide agreement reached earlier this month giving 3.7 million employees in Germany's metalworking sector a 3.4-percent pay hike on July 1 followed by a 2.2-percent rise in May 2014.
VW has negotiated its own separate wage agreement with unions for a number of years now for its sites in western Germany.
Under the terms of VW's deal, the carmaker will also make a one-off payment of 300 euros ($388) for each employee into the company's pension scheme.
Volkswagen employs around 550,000 people worldwide and booked record profits of 21.7 billion euros in 2012.