The South Shore School Board voted in favour of a settlement with Peter Speight late Wednesday at its meeting in Lunenburg.
The vote came after the board held an in-camera meeting with its legal adviser.
Board Superintendent Nancy Pynch-Worthylake confirmed the settlement was for more than the $150,000 in back pay that Speight was owed, but she declined to provide further financial details.
She says he will have to resign his position.
Word of the deal came just hours after Nova Scotia's education minister had stepped in to direct that Speight be placed on administrative leave until a dispute over his teaching certificate was resolved.
Parents of students at the rural school in New Germany, N.S., where Speight used to teach reacted with outrage this week when told that he would probably return to work in January.
Speight was given a conditional discharge in 2009 after he pleaded guilty to committing an indecent act for three incidents in Halifax in which he stopped his car, hailed a woman on the sidewalk and masturbated.
Last month, the Supreme Court of Nova Scotia upheld an arbitrator's ruling that said the school board was wrong to terminate his job as a Grade 3 teacher.
The court said the firing was unreasonable. It also said Speight had completed rehabilitation, is considered a low risk to reoffend and should be awarded $150,000 in back pay.
The Education Department had also revoked Speight's teaching certificate after his guilty plea, but another arbitrator overturned that decision.
That prompted the department to ask for a judicial review.
The courts had ordered that the board engage in a so-called restorative approach to ensure Speight's reintegration at the school went smoothly.
That approach included a series of meetings earlier this week with teachers and parents.
During two of those meetings, parents lashed out at the school board, saying their children were being put at risk.
Local resident Alice Eagles said she and her husband were among many parents considering pulling their children out of the school.
"For this man to have our small, peaceful community in total uproar is unnecessary and selfish," she said in an interview before the board's decision.
"My six-year-old daughter is asking me questions that no six-year-old should ask any parent. The kids are scared to go to school."
Eagles said she and other school volunteers would never be allowed to return to the school if they pleaded guilty to a similar offence.
"I'm all for second chances, but I don't think that this is an appropriate place for one," she said. "I'm not willing to risk my children's innocence."
Speight couldn't be reached for comment.