The settlement allows Davis' "See Jane" project to become an independent organization, The Minneapolis Star-Tribune reported.
In the suit, Davis accused Dads & Daughters -- a group based in Duluth -- of taking credit for her idea. She has agreed to withdraw the suit, which also named the group's president and former executive director as defendants.
For three years, between 2003 and 2006, Dads & Daughters was involved in research for the project while Davis raised money.
Davis has played a woman president in the TV show "Commander in Chief" and starred in the feminist road-trip drama "Thelma & Louise," as well as "A League of Their Own," about professional women ballplayers.
She won a supporting actress Oscar for her performance in "The Accidental Tourist."
Notable deaths of 2014 [PHOTOS]
Kelly Ripa's penthouse sells for $20M