As part of the deal Diageo is acquiring other brands in the Davos Brands' portfolio consisting of Astral Tequila, Sombra Mezcal and TYKU Sake.
Aviation American Gin is the second largest and one of the fastest growing brands within the super premium gin segment in the United States, it said.
Co-owner Ryan Reynolds, who will retain an ongoing ownership interest in Aviation American Gin as part of the deal.
The American style gin is crafted with a blend of botanicals, with subtle juniper notes, delivering a smooth balanced flavour profile.
In 2019, it grew volumes at over 100%, adding the highest number of cases and contributing 40% of super premium gin segment growth (IWSR, 2019).
The total consideration is up to $610m, which includes an initial payment of $335m and a further potential consideration of up to $275m is based on the performance of Aviation American Gin over a ten-year period.
Ivan Menezes, chief executive of Diageo, said: "We are delighted to announce this transaction, which supports our participation in the super premium gin segment in the United States.
“The acquisition of Aviation American Gin and the Davos Brands portfolio is in line with our strategy to acquire high growth brands with attractive margins that support premiumisation. We are confident that Aviation American Gin will continue to shape and drive the growth of super premium gin in North America and we are looking forward to working with Ryan Reynolds and the Davos Brands team to accelerate future growth."
Reynolds said: "A little over two years ago, I became an owner of Aviation Gin because I love the taste of Aviation more than any other spirit. What I didn't expect was the sheer creative joy learning a new industry would bring.
“Growing the brand with my company, Maximum Effort Marketing, has been among the most fulfilling projects I've ever been involved with. I want to thank Diageo for their incredible team and passion. We're so excited for the next chapter of Aviation Gin, which, I promise, will require just as little reading."
Davos Brand was founded in 2014 and specialises in identifying key trends and early stage brands as well as creating and executing sales and marketing strategies for high growth brands in high growth categories.
The acquisition will be funded through existing cash and is expected to close before the end of 2020, subject to regulatory clearances.