The money would go to police officers, firefighters and others involved in rescue and cleanup operations after the terrorist attacks of Sept. 11, 2001. About 10,000 people have filed claims, The Wall Street Journal reported.
The settlement negotiated by New York City, plaintiffs' lawyers and other parties increases the total compensation offered from $657 million. U.S. District Judge Alvin Hellerstein rejected that package in March.
"This is a very good deal," Hellerstein said Thursday. "I am very excited about this deal."
Those eligible for the settlement suffered respiratory and other health problems from working in the ruins of the trade center that did not become obvious until after 2003. At that point, they were no longer able to seek payment from a compensation fund set up by the federal government for victims of the attacks.
Individual payments will range from $3,250 for those who have not yet shown any symptoms of illness to more than $1 million for those with disabling respiratory disease.