The Queen has indicated the Duke and Duchess of Sussex are to start a more "independent life" away from full-time royal duties and begin a transition period living in the UK and Canada.
In her first public comments since Meghan and Harry released their bombshell statement last week the head of state also expressed her regret at the Sussexes' wish to step back as senior royals.
But she said her family "respect and understand" their wishes for more independence while still remaining a "valued part" of the monarchy.
In a highly unusual move Harry and Meghan were not referred to as the duke and duchess in the statement, only as the Sussexes and by their first names, raising questions about whether they will retain their titles in the future.
The Queen was joined by the Prince of Wales and Duke of Cambridge for the face-to-face talks with Harry at her private Norfolk estate, described as "very constructive", and it is thought Meghan joined the discussions by telephone from Canada after the monarch made reference to comments by the duchess and her husband.
It is unusual for the Queen to issue a statement in her own name – when not paying condolences following a natural disaster or the death of a world leader – and is symbolic of the sovereign taking charge of the crisis that threatens to cause lasting damage to the monarchy.
The head of state also expressed the "support" of herself and the rest of the family for the couple's aspiration to create a new life together with their eight-month-old son Archie.
But she stressed the discussions were "complex matters" for her family to resolve but she wanted "final decisions" in the "coming days".
Harry and Meghan made clear in their statement last week they want to step back from being senior royals, become financially independent and split their time between North America and the UK.
The head of state said: "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."