Armstrong, 46, was due to face a trial next month over claims he defrauded the US government when he took drugs while racing for his United States Postal Service-sponsored team.
The Postal Service and Armstrong's former team-mate, Floyd Landis, had sought around 100 million euros in damages from Armstrong in the case, which was due to start on 7 May.
However Armstrong's lawyers and the US justice department brokered a settlement. "No one is above the law," said Chad Readler, a lawyer for the US justice department in a statement announcing the deal.
"This settlement demonstrates that those who cheat the government will be held accountable."
Elliot Peters, Armstrong's lawyer, said in a statement that the settlement ended all litigation against Armstrong related to his admission in 2013 that during his career as a professional cyclist he had used performance enhancing substances.
"I am glad to resolve this case and move forward with my life," Armstrong said in a statement.
"I'm looking forward to devoting myself to the many great things in my life - my five kids, my wife, my podcast, several exciting writing and film projects, my work as a cancer survivor, and my passion for sports and competition. There is a lot to look forward to."
Armstrong won the Tour de France for consecutive years between 1999 and 2005. But he was stripped of his titles once the extent of his cheating was revealed.
"I have since 2013 tried to take full responsibility for my mistakes and make amends wherever possible," Armstrong added. "I rode my heart out for the Postal cycling team and was always especially proud to wear the red, white and blue eagle on my chest when competing in the Tour de France. Those memories are very real and mean a lot to me."
Landis meanwhile told ESPN he was relieved that he would not have to confront Armstrong in a courtroom battle.
"I really didn't want to relive it in a courtroom and I don't think Lance did either," said the 42-year-old. "I don't know that that would have really accomplished anything. Rather than going through that humiliation again, we're better off. It was up to Lance, but I think he probably feels the same way."
Since his public humiliation, Armstrong has lost lucrative sponsorship deals and in 2015 was ordered to repay 10 million euros in bonus payments given to him by Dallas-based SCA Promotions relating to his Tour wins in 2002, 2003, and 2004.
Although rumours of drug use hovered around Armstrong throughout his career, he never failed a doping test.
However his web of lies was exposed when the United States Anti-Doping Agency wrapped up an investigation which concluded he had been at the heart of a sophisticated doping programme throughout his career.
Armstrong eventually confessed to using performance-enhancing drugs and was banned from all competitions for life.