Details of the 63-year-old former International Monetary Fund chief ‘s agreement with Nafissatou Diallo will remain confidential, the judge added.
DSK was held in New York in May 2011 after Nafissatou Diallo, 33, said he assaulted her in his hotel suite.
Prosecutors later dropped charges amid concerns about her credibility.
The incident was widely seen as having ruined DSK’s chance of becoming the Socialist presidential candidate in his native France.
New York State Supreme Court Justice Douglas McKeon announced on Monday that after lengthy negotiations, the parties “came together and put terms of a settlement on the record”.
The amount of the settlement was kept confidential.
DSK did not attend the hearing, but Nafissatou Diallo was in court.
After the settlement, the judge thanked all parties and said it was a “privilege to work with all of you”.
Outside the courtroom, Nafissatou Diallo made a short statement: “I thank everybody all over the world and everybody at the court, and God bless you all.”
Her lawyer, Kenneth Thompson, said afterwards that she was “ready to move on”.
In May 2011, Nafissatou Diallo, a Guinean immigrant with a teenage daughter, said Dominique Strauss-Kahn had forced her to perform oral sex when she went to clean his hotel room.
He was arrested, charged with attempted rape and forced to resign from his post at the International Monetary Fund.
DSK had previously admitted to a “moral failing”, but insisted their sexual encounter was consensual.
In the wake of Nafissatou Diallo’s accusations, other women came forward with sexual assault allegations against him.
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