The food company also said that it had agreed to pay $5 million as part of the deal.
In the suit, first filed in California in 2011, the plaintiffs argued that some of the ingredients in Kashi products -- pyridoxine hydrochloride and calcium pantothenate, for example -- were processed and should not be classified as "natural."
Those ingredients could be derived from "natural" sources, like wheat germ, according to The New York Times, but companies will sometimes synthetic versions for cost and consistency reasons.
The Food and Drug Administration does not have a specific definition for "natural" ingredients, but Kashi isn't the only product to face scrutiny over its labeling practices. Ben & Jerry's, for example, agreed to stop using the term back in 2010, when consumer advocates pointed to the ice-cream maker's use of hydrogenated oils as "unnatural."
"We stand behind our advertising and labeling practices," Kellogg said in a statement. "We will comply with the terms of the settlement agreement by the end of the year and will continue to ensure our foods meet our high quality and nutrition standards while delivering the great taste people expect."