Mr Jarvis had been set for a showdown with Labour over its ruling that he could not remain an MP if he was elected mayor of the Sheffield City Region on May 3.
But the party said in a statement today that the situation has now been resolved, meaning that it has now endorsed the former soldier as its candidate. He will be officially nominated by Labour later this week.
In a statement released by the Labour Party, Mr Jarvis said: “I am honoured to be Labour’s candidate for the Sheffield City Region mayoral election and I am looking forward to the campaign.
“This is an important role at a crucial moment and we must ensure that we elect a Labour mayor who will deliver a bold and radical plan for delivering real change for the people of South Yorkshire.”
Mr Jarvis was chosen by Labour members in South Yorkshire last month after securing 58 per cent of the vote in the race against his rival, Sheffield city councillor Ben Curran.
Labour’s National Executive Committee (NEC) ruled days before the nomination was announced that MPs should not hold more than one full-time elected public office.
Last week, The Yorkshire Post revealed that the region’s group of Labour MPs had written to the party leadership describing as “undemocratic, unfair” and “an insult” the decision by the party’s left-leaning ruling body.
Mr Jarvis has always said he wanted to combine the two roles while sacrificing his mayoral salary, as the devolved post will initially have “no power and no resources" and he wants to maintain influence in Westminster to get a good deal for the area and push for a Yorkshire-wide agreement that could make the Sheffield City Region job redundant in 2020.Separately, South Yorkshire's four council leaders wrote a letter to the NEC, copied to Mr Corbyn, in which they said they were "gravely concerned" at the NEC decision.
It pointed out that Mr Jarvis was chosen by a clear majority of local Labour members and with the support of his own local Labour Party in Barnsley.
The post of the Sheffield City Region Mayor has been mired in controversy because, unlike similar roles in Manchester and the West Midlands, no devolution and funding deal has yet been agreed to go with the appointment.
Two of the four South Yorkshire councils - Doncaster and Barnsley - have rejected a devolution solution centred on the county in favour of joining a pan-Yorkshire proposal.
Last month, 18 of the 20 local authorities in Yorkshire agreed to back a proposal to the Government to deliver a One Yorkshire devolution deal. Sheffield and Rotherham were the only Yorkshire councils not to sign up to the plan.
Mr Jarvis is the overwhelming favourite to win the contest as all of the 14 South Yorkshire constituencies which will take part in the election were won by Labour at the last general election.Nominations for candidates for the May 3 election close on Friday April 6.