The companies had locked horns in patent disputes for two years, The New York Times reported Tuesday.
There were more than 40 legal disputes filed between the two technology firms in several countries.
Nokia said the agreement covers all outstanding complaints filed with the International Trade Commission. Apple said the companies "agreed to drop all of our current lawsuits."
Stephen Elop, Nokia's president and chief executive officer, said, "We are very pleased to have Apple join the growing number of Nokia licensees."
"This settlement demonstrates Nokia's industry-leading patent portfolio and enables us to focus on further licensing opportunities," Elop added.
Apple downplayed the agreement, saying it did not cover, "the majority of the innovation that makes the iPhone unique," but Nokia shares rose 1.8 percent in Helsinki, Finland, when the news of the agreement broke.
German intellectual property expert Florian Mueller in German said, "The deal structure is very telling. A combination of a payment for past infringements as well as running royalties is a clear indication that there's serious money in this for Nokia."