Gyanraj Rai, 55, had been camped out opposite Prime Minister David Cameron's Downing Street office in London threatening to starve himself to death.
Earlier this week around 1,000 ex-Gurkhas who served with the British army marched past Downing Street to highlight their call for better pension, benefits and health care rights.
Lawmaker Rob Wilson from Cameron's Conservative party brokered a deal between campaigners and parliamentarians to end the protest.
A cross-party commission will take written and oral evidence before reporting its findings, which will be considered by the government next year.
"This is a happy day for all concerned. Gyanraj Rai has now agreed to cease his fast. The parliament has set up an enquiry into all Gurkha grievances, both past and present," she told supporters.
"Everything that you want to say to parliament will be heard over the next few months as a matter of extreme importance and urgency so today is a day of celebration and satisfaction and courage."
Gurkhas recruited from Nepal have played a valued role in the British army for nearly two centuries.
A British government spokesman welcomed the deal.
"The government was concerned about the welfare of Mr Rai throughout the period of his hunger strike and is glad that he has ended this action," the spokesman said.
"The All Party Parliamentary Group on Gurkha issues has offered to hold an enquiry into Mr Rai's concerns and all the relevant government departments will co-operate fully with the review."
Wilson said he was "delighted" to have brokered the deal.
"Everyone in Britain should be grateful for the Gurkhas' bravery and loyalty in the service of our country," he said.
About 200,000 Gurkhas fought for Britain in World War I and World War II and more than 45,000 have died in British uniform. They have a reputation for ferocity and bravery and are known for their distinctive curved Kukri knives.
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