The Queen has said Buckingham Palace "supports" Prince Harry and Meghan Markle's decision to step back from royal life - but would have preferred them to stay.
The extraordinary statement comes following a crunch summit at Sandringham this afternoon.
The Queen says she and her family are "entirely supportive" of the couple's decision to create a new life, adding that the royals have agreed on a "transition period" to support their desire to split their time between Britain and Canada.
The unprecedented gathering at the Queen's estate in Norfolk was attended by the Duke of Sussex, 35, his grandmother the Queen, 93, Charles, 71, and Prince William, 37.
It was the first time Harry had come face to face with them since his and Meghan Markle's stepping back announcement last week which rocked Buckingham Palace.
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Meghan, meanwhile, was with their baby son Archie in Canada, but a royal source said it was likely she joined the crisis talks by phone.
Princes Charles and William were seen driving away from Sandringham this evening in separate vehicles.
Prince Harry was not spotted leaving, however he was believed to have left in a black Range Rover in which his new private secretary Fiona Mcilwham was seen sitting in the front seat.
The Queen's full statement
"Today my family had very constructive discussions on the future of my grandson and his family.
"My family and I are entirely supportive of Harry and Meghan’s desire to create a new life as a young family.
"Although we would have preferred them to remain full-time working Members of the Royal Family, we respect and understand their wish to live a more independent life as a family while remaining a valued part of my family.
"Harry and Meghan have made clear that they do not want to be reliant on public funds in their new lives.
"It has therefore been agreed that there will be a period of transition in which the Sussexes will spend time in Canada and the UK.
"These are complex matters for my family to resolve, and there is some more work to be done, but I have asked for final decisions to be reached in the coming days."
The lead-up to the crisis talks
It was expected the royals would lay their cards on the table during the critical meeting to discuss what happens for the couple now.
The announcement by the Queen this evening came hours after William and Harry took the unusual step to issue a joint statement dismissing bullying claims.
It said: “Despite clear denials, a false story ran in a UK newspaper today speculating about the relationship between The Duke of Sussex and The Duke of Cambridge.
“For brothers who care so deeply about the issues surrounding mental health, the use of inflammatory language in this way is offensive and potentially harmful.”
Meanwhile, staff at Sandringham were asked to prepare the Long Library room, which previously housed a bowling alley.
'Furious' Prince Philip seen leaving Sandringham as Queen prepares for crisis talks
It is also where Harry and William used to have high tea with mum Princess Diana and their royal cousins.
Media from around the world have been gathered near the estate ahead of the meeting today as reporters waited for news.
It is thought William would be travelling from Anmer Hall, and Harry from Frogmore Cottage near Windsor Castle.
Charles was in Oman yesterday to attend a condolence ceremony following the death of Sultan Qaboos bin Said al Said, but arrived back in the UK last night.
Prince Philip, the Duke of Edinburgh, was also snapped this morning on the estate in the passenger seat of a Land Rover, however it is not thought he was involved with the crunch talks.
The 98-year-old was reported to have been "spitting blood" following Meghan and Harry's announcement.
Today is an historic day for the Royal Family (Image: AFP/Getty Images)
More than 100 miles away in London, Kate Middleton, the Duchess of Cambridge, appeared to look strained as she was photographed leaving Kensington Palace.
In their statement last Wednesday evening, Harry and Meghan said they had reached the decision "after many months of reflection and internal discussions".
They want "to carve out a progressive new role" while still "continuing to fully support Her Majesty The Queen."
They also plan to split their time between the UK and North America.
Meghan Markle 'told Harry that being in Royal Family is not working for me'
But the bombshell is said to have 'blindsided' the Royal Family, left the Queen 'hurt' and Charles and William 'incandescent with rage'.
It is claimed they were not fully briefed about the extent of the couple's plans before they went public.
Kate Middleton looks strained ahead of Meghan and Harry's crisis talks at Sandringham
It emerged today that Harry and Meghan reportedly had a 'private WhatsApp plan' for during the talks.
The Duchess is also said to have 'told Harry that being in Royal Family is not working for me '.
And Harry was reportedly ‘heartbroken’ at being put in a position where he has been made to choose 'between Meghan and the Queen’.
There are a range of issues they are thought to have discussed in the meeting, and it is likely the royals would try to come to some agreement to stop the immediate crisis causing lasting damage to the monarchy.
Harry and Meghan's statement - and a new official Sussexroyal.com website - have thrown up important questions about funding for the couple's round-the-clock security, media access to their royal events and how they will pay for their future lifestyles.
Other important issues to resolve include who will pay for the substantial security cost of protecting the couple and their baby son if they spend large portions of the year in Canada and possibly America.
Before the meeting, the royals will be given written proposals produced by their offices and others, including relevant government departments from the UK and Canada, where it is thought Harry and Meghan will establish a second home.
It is not known who else, if anyone, was at the meeting - but it is likely the private secretaries of the four royals may have joined part of the talks to assist with any questions.
On Thursday, the Queen, Charles and William gave orders for their households to work with the Sussexes' team to quickly find a "workable solution" to their desire to change the direction of their royal lives, but still support the Queen.
A royal source said "next steps" will be agreed at the meeting, adding that it is the Queen's wish that the issue is resolved "at pace".
Some at Buckingham Palace are reported to fear that Harry and Meghan could conduct a potentially damaging television interview if they do not get what they want.
In an article for The Sunday Times, broadcaster Tom Bradby - a friend of both Harry and William - said: "I have some idea of what might be aired in a full, no-holds-barred, sit-down interview and I don't think it would be pretty."