The deal comes after Dutch group ING put its British and Canadian online banking businesses under review in August as it seeks to raise funds to repay cash owed after a state bailout at the height of the financial crisis.
ING said it would incur a 320 million euro (£260 million) loss on the sale, as it has agreed to sell its mortgages to Barclays at a 3% discount to the book value.
Jan Hommen, chief executive of ING, said: "ING Direct UK operated in a very competitive market over the past years and I am proud of the excellent customer experience our UK team has built."
Ashok Vaswani, head of Barclays retail and business banking arm in the UK, said: "We intend to maintain the high standard of service and honour the existing terms and conditions (customers) have experienced with ING Direct UK."
ING first launched its online banking venture ING Direct in the UK in 2003 and continues to run similar businesses in Australia, Austria, France, Germany and Italy. The group has already been forced to sell several businesses after receiving billions of pounds from the Dutch government in 2008. Last year it sold its US business ING Direct for around nine billion US dollars (£5.8 billion) and Dutch banking business Westerland-Utrecht.