A major California Indian tribe aiming to expand its casino has agreed to swap out controversial gambling machines for less lucrative devices, averting a lawsuit threatened by Gov.

Arnold Schwarzenegger, both sides said on Tuesday.

"The tribe would have been at risk of losing everything for a single game," said George Forman, an attorney for the Morongo Band of Mission Indians.

Under the accord with the Morongo tribe, which last month opened a new $250 million hotel and casino near Palm Springs, about 2,000 video lottery machines would be reconfigured as electronic bingo games.

Video lottery terminals operate on a linked computer system with players vying for a set pool of prizes, while slots are games played against the house. The state claims both types should be counted within the cap allowed under tribal gaming compacts. Under the agreement, the video lottery machines must become bingo-style games or be removed.

Forman said the tribe has shut down the video lottery terminals and is in the process of converting a number of them to operate as part of a network of electronic bingo terminals that run in Indian casinos across the country.

"The terminals are much more interactive than either a video lottery machine or a slot machine," he said. Because the bingo games are slower, they will result in lower revenue for the casino, the attorney added.

Several Indian tribes are negotiating with the state over terms for expanding casinos. California had previously threatened a lawsuit, accusing the Morongo tribe of violating its limit of 2,000 slot machines.

Schwarzenegger spokesman Vince Sollitto said a similar deal has been offered to the Pechanga tribe, which operates a casino near Temecula, but it has not yet responded.

"This shows that the dispute resolution process under the 1999 compacts works," said Anthony Miranda, chairman of the California Nations Indian Gaming Association. Those gaming compacts were negotiated by then-governor Gray Davis.

Sollitto said no date has been set for renewed compact negotiations with the Morongo tribe.

Forman said the agreement on video lottery terminals clears the way for the tribe to sue the state over its definition of gaming machines, but no such decision has been made. The tribe still believes the terminals are allowed under its gaming compact.

State voters in November turned down a ballot initiative that would have allowed unlimited Indian casino expansion in return for payments at the level of corporate income tax. Tribes have sovereignty on par with U.S. states and so do not pay state taxes, but both sides must agree to terms of gambling within state boundaries.

Most tribes have agreed with the state to limit casinos to 2,000 slot machines each, about two-thirds the level of many Las Vegas resorts.

But five tribes near San Diego and Sacramento earlier this year agreed with Schwarzenegger to a deal providing the state with up to 25 percent of gambling revenue in exchange for unlimited slots and exclusive rights to operate Nevada-style gambling in the state.