In Bronx supreme court on Monday, a judge announced that an agreement had been reached just minutes before the session started, adding that the amount – which is rumoured to be as much as $6m – remained "confidential".
It brings to an end a lengthy New York court battle for the man once tipped to become French president, having earlier seen criminal charges of attempted rape dropped. Nonetheless, Strauss-Kahn's legal woes are not completely behind him – he is yet to hear if prosecutors in France will be allowed to pursue charges of aggravated pimping related to an alleged prostitution ring in France. A court is due to rule in that case on 19 December.
The lawsuit settled in New York on Monday relates to claims by Nafissatou Diallo, a 33-year-old former housekeeper at the upmarket Sofitel hotel in Manhattan.
She says Strauss-Kahn attacked her on 14 May 2011 as she attempted to clean his room.
Diallo alleges that Strauss-Kahn ran at her naked, molested her and forced her to perform oral sex on him. The claims led to a criminal investigation against the IMF boss last year, and to his house arrest in Manhattan.
But charges of attempted rape, sex abuse, forcible touching and unlawful imprisonment were eventually dropped, with prosecutors citing "substantial credibility issues" with Diallo.
Despite the collapse of a criminal investigation, Diallo continued to pursue Strauss-Kahn through the civil courts, leading to a counter defamation suit by the former IMF head.
At first, Strauss-Kahn's lawyers tried to claim that their client had diplomatic immunity him from being sued. But that failed, with the courts dismissing his claims of protection.
A settlement in the case was widely expected ahead of Monday's hearing. Strauss-Kahn's New York attorneys had previously acknowledged that talks had taken place. But they dismissed as "flatly false" a French newspaper's report that the amount agreed to was a payment of $6m to Diallo.
In court on Monday, judge Douglas McKeon confirmed that a deal had been struck, but not the amount.
"Ten minutes ago we reached a settlement in this case, which was put on the record," he said during a brief session.
He added: "The amount of the settlement is confidential."
McKeon also confirmed that a claim against the New York Post – which had reported that Diallo had worked as a prostitute – had also been settled. Again, the terms were not discussed in open court.
Diallo sat through the court proceedings accompanied by her legal representatives. Dressed in a snow-leopard skin print headscarf and emerald blouse, she made no statement while in the courtroom.
But in brief comments on the steps of the Bronx supreme court, Diallo, who was born in Guinea and who is the mother to a teenage girl, thanked her supporters.
"I just want to say I thank everyone that supported me all over the world. I thank everybody; I thank God," she said.
Her attorney, Kenneth Thompson, said Diallo was a "strong and courageous woman who never lost faith in our system of justice".
"With this resolution, she can now move on with her life," he added.
Strauss-Kahn was not in court. Nor did his legal representatives offer any comment after it was announced that settlement had been struck, other than to thank the court.
Monday's hearing marks an apparent end to Strauss-Kahn's New York legal battles. But it has come at cost for the 63-year-old. As well as losing his job at the IMF, it ended any realistic chance Strauss-Kahn had at a run at the French presidency as further lurid details of his lifestyle later emerged.
In addition, it led to a raft of other sexual allegations being made against him and likely contributed to his separation from his wife, French journalist Anne Sinclair.
Next week, Strauss-Kahn will hear if a separate attempt to get charges levied against him by French prosecutors thrown out has been successful.
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