The housekeeper, Nafissatou Diallo, looked composed and resolute as state Supreme Court Justice Douglas McKeon announced the confidential deal. Strauss-Kahn stayed in Paris and was mum when asked about the settlement, which came after prosecutors abandoned a related criminal case because they said Diallo had credibility problems.
"I thank everyone who supported me all over the world," Diallo, who has rarely spoken publicly since the May 2011 encounter between her and Strauss-Kahn, said softly after court.
"I thank God, and God bless you all," she added.
In a statement, Strauss-Kahn attorneys William Taylor III and Amit Mehta said the former diplomat was "pleased to have arrived at a resolution of this matter." They credited the judge with "patience and forbearance" that fostered the agreement.
The lawsuit stemmed from an encounter in Strauss-Kahn's luxury Manhattan hotel suite.
Diallo, a 33-year-old housekeeper from Guinea, told police Strauss-Kahn forced her to perform oral sex, tried to rape her and tore a ligament in her shoulder after she arrived to clean his suite. The 63-year-old Strauss-Kahn, who has since separated from his wife, has said what happened was "a moral failing" but was consensual.
The allegations led to his arrest, forced him to resign his IMF post and cut off the Socialist's potential candidacy for the French presidency.
The criminal case was dropped after prosecutors said they couldn't trust Diallo. Among their concerns: She was inconsistent about her actions right after leaving his suite, and she told a compelling but false story of having been raped previously.
She said she always told the truth about Strauss-Kahn and would press her claims in the lawsuit. Strauss-Kahn called her suit defamatory and countersued for $1 million.
The judge said he met Diallo earlier this year and talked with her about the prospect of settlement talks. The negotiations continued, with a lengthy discussion involving the judge late last month, and a final deal was inked just Monday, McKeon said.
"I want to say what a privilege it has been to work with all of you and to work on this case," he told Diallo and the attorneys for both sides.
The judge said Diallo also settled a separate libel lawsuit against the New York Post over a series of articles that claimed she was a prostitute; the details of that settlement also weren't disclosed. A spokeswoman for the News Corp.-owned newspaper didn't immediately respond to a request for comment.
Diallo attorney Kenneth Thompson called her "a strong and courageous woman who never lost faith in our system of justice. With this resolution, she can move on with her life."
Diallo is a widowed mother of a teenage daughter. She has been on worker's compensation since her encounter with Strauss-Kahn, according to the hotel chain.
After Diallo came forward, other sexual allegations emerged against Strauss-Kahn, who had been known as a womanizer but largely viewed as debonair.
French judges are to decide by Dec. 19 whether to annul charges linking him to a suspected prostitution ring run out of a luxury hotel in Lille. He acknowledges attending "libertine" gatherings but says he didn't know about any women getting paid to participate.
Another inquiry, centred on allegations of rape in a hotel in Washington, D.C., was dropped after French prosecutors said the accuser, an escort, changed her account to say she wasn't forced to have sex.
And French prosecutors also have looked into writer Tristane Banon's allegations that Strauss-Kahn tried to rape her during an interview in 2003, a claim she made public after his New York arrest and he called imaginary and slanderous. Prosecutors said they believed the encounter qualified as a sexual assault, but the legal timeframe to pursue her complaint had elapsed.
The Associated Press does not name people who report being sexually assaulted unless they come forward publicly, as Diallo and Banon have done.
Several hours before the court date in New York, Strauss-Kahn was seen in Paris leaving his new residence in the Left Bank neighbourhood of Montparnasse. Dressed in jeans, a white shirt and open black jacket and clutching a stack of dossiers, he ducked into a black Audi waiting for him. Asked by AP Television News whether he was relieved the New York end of his legal problems would soon be over, he refused to respond.
Associated Press Writer Tom Hays contributed to this report.