Resource manager Eric Bergh with the Calleguas Municipal Water District in Ventura County said he could not provide any details about the agreement until it's approved.
The proposed settlement will go before the district's water board Wednesday.
"Staff recommendation will be to accept," Bergh said.
A representative for Selleck didn't immediately return a request for comment. Selleck's wife was also named in the suit.
The lawsuit filed by the Calleguas Municipal Water District claims a tanker truck filled up at a hydrant and hauled water to Selleck's 60-acre ranch in Westlake Village more than a dozen times in the past two years.
The district said it spent nearly $22,000 for a private detective to investigate.
The Ventura County Sheriff's Department investigated the allegations but was unable to establish that a crime had taken place, Capt. John Reilly said on Wednesday.
According to the district, officials sent Selleck cease-and-desist letters to stop the water deliveries, but as recently as March a truck was seen filling up at a hydrant and delivering water to the ranch.
California has been hard hit by a four-year drought, and the community where Selleck has his land is under mandatory cutbacks as high as 36 per cent.