The seven-year contract includes ten albums and Jackson recordings which have never been released.
Some albums could also see previously released hits being re-worked.
The contract with Sony could be worth as much as $250m if a computer game or DVD compilation of videos, both being considered, are also released.
Jackson’s estate owns all of the star’s recordings but Sony has the rights to distribute them until 2015. This agreement extends it to 2017.
Sony has sold about 31m copies of Jackson’s albums worldwide since his death in Los Angeles on 25 June.
Entertainment lawyer John Branca, the co-administrator of the Jackson estate, said: “During his life, Michael’s contracts set the standard for the industry. By all objective criteria, this agreement with Sony Music demonstrates the lasting power of Michael’s music by exceeding all previous industry benchmarks.”
The soundtrack of the film This Is It – his last project – is expected to be included in the deal.
The clamour for Michael Jackson memorabilia and records has made him one of the most bankable stars ever. However, he left debts which the money from the new deal could be used to help pay off.
Rob Stringer, chairman of Sony Music’s Columbia Epic Label group, added: “We’re dedicated to protecting this icon's legacy and we’re thrilled that we can continue to bring his music to the world for the foreseeable future.”