The Big Ten Conference school fired O'Brien in 2004 when he violated NCAA rules by giving potential recruit a $6,000 loan.
His attorney, Joseph Murray, confirmed the payment.
An NCAA ruling March 10, 2006, banned O'Brien from coaching for extending the loan to recruit Aleksander Radojevic from Serbia.
Later, he won a lawsuit against the school for wrongfully firing him and was awarded $2.2 million plus interest.
OSU attorneys appealed to the U.S. Supreme Court after an appeals court upheld the award and in February, the court refused to hear the appeal.
"I have felt all along that the penalty imposed upon me by the committee of infractions was both excessive and unjust," O'Brien said in a statement Jan. 31.
He was not available for a comment about his monetary settlement, which occurred on Thursday.