A mediation center in California announced the agreement, in which the league and NFL Properties would pay $765 million for medical benefits and injury compensation.
"This agreement lets us help those who need it most and continue our work to make the game safer for current and future players. Commissioner Goodell and every owner gave the legal team the same direction: do the right thing for the game and for the men who played it," NFL Executive Vice President Jeff Pash said in a statement.
"We thought it was critical to get more help to players and families who deserve it rather than spend many years and millions of dollars on litigation.
"This is an important step that builds on the significant changes we've made in recent years to make the game safer, and we will continue our work to better the long-term health and well-being of NFL players."
More than 4,500 former players, including 10 Pro Football Hall of Fame inductees, and relatives filed suit against the NFL alleging that some health problems since their playing careers ended were related to concussions suffered in football-related activities, such as games and practices.
The funds are also to be used for medical and safety research and plaintiffs' expenses related to the lawsuits.
The NFL denies wrongdoing in the settlement offer.
The agreement was reached during two months of meetings between the former players, the NFL and court-appointed mediator Layn Phillips, a former U.S. district judge. The settlement must be approved by U.S. District Judge Anita B. Brody in Philadelphia.
"This is a historic agreement, one that will make sure that former NFL players who need and deserve compensation will receive it, and that will promote safety for players at all levels of football," Phillips said.
"Rather than litigate literally thousands of complex individual claims over many years, the parties have reached an agreement that, if approved, will provide relief and support where it is needed at a time when it is most needed."