Dina Lohan's attorney made the settlement announcement outside the Nassau County Matrimonial Center courtroom, New York's Newsday reported.
Terms of the settlement weren't disclosed but Michael Lohan will be allowed to spend time with his children as early as next month, TV's "Access Hollywood" reported.
"Now the healing process can begin for myself and my children," Dina Lohan said.
Michael Lohan said he wishes his soon-to-be former spouse "the best."
The couple's famous daughter has been in the news lately for alleged substance abuse problems and a recent arrest for cocaine possession.
Dina Lohan told reporters Friday her daughter was doing "fantastic," Newsday said.