Financial terms of the deal were not disclosed.
The sale of the North American operations comes more than a year after Citigroup sold the international portion of the Diners Club operations to Discover Financial Services. The international business was sold to Discover in April 2008 for $165 million.
New York-based Citi, among the hardest hit banks by the credit crisis last year, has been selling off divisions throughout 2009 that are no longer considered part of its primary consumer and institutional banking operations.
Last week, Citi agreed to sell its controlling stake in Japan's leading call center operator, Bellsystem24, for $1 billion.
Citi twice received bailouts from the government, totaling $45 billion, as losses mounted on soured investments and failing customer loans. A portion of that government investment was converted to a 34-percent stake in the bank. The remaining money has yet to be repaid.
Citigroup said the sales will likely lower its assets in Citi Holdings, the division holding noncore assets, by about $1 billion, but should not have a material impact on its net income or capital ratios.
The acquisition gives Toronto-based BMO, the parent of Bank of Montreal, exclusive rights to issue Diners Club cards to corporate and professional clients in the U.S. and Canada. It includes the Club Rewards program and the Diners Club professional card.
BMO, which owns Chicago-based Harris Bank, said the deal will add $7.8 billion in card transactions and gives it net receivables of nearly $1 billion, making it more competitive in the North American commercial card market.
"The Diners Club North American franchise brings new card members to our company, provides attractive additional options for our existing customers and makes us an even more compelling choice in the market for prospective commercial customers in Canada and the United States," Frank Techar, president and CEO of personal and commercial banking at BMO Bank of Montreal, said in a statement.
Citigroup will support Diners Club operations until the transition to BMO is completed.
The acquisition is expected to close before March 31, 2010.
In premarket trading, shares of Citigroup slipped 2 cents to $4.26.