AFSCME District Council 33 President Greg Boulware made the announcement on Friday night during a press conference with Mayor Cherelle Parker.
"We signed off on a one-year extension with the city of Philadelphia that provided our members with a raise that would help raise the quality of life for our people, and insist a stepping stone into the direction that we would like to see our membership be in," said Boulware.
The contract agreement includes a 5% salary increase, a one-time bonus of $1,400 and other benefits.
News conference held after AFSCME District Council 33 reaches agreement with city
Last week, members voted to authorize a strike.
"There will be no work stoppage in the City of Philadelphia. This is tremendous news we can all feel very good about - for our city, for the City workers who are represented by District Council 33, and for this Administration," said Parker.
The union represents at least 9,000 municipal employees in the Streets Department, Sanitation Department, Water Department, Police Dispatch and other agencies.
The union and administration say this is just the beginning and they'll continue to meet at the table for a long-term deal.
"We're going to continue to press forward with that and continue to make the lives better for our members of DC 33," said Boulware.
Both sides will be back negotiating on a multi-year deal in January.