"I'm glad it's over with," Lona Varner told The Oklahoman of Oklahoma City Tuesday.
A civil trial had been set for next Monday, but the suit was settled Friday for undisclosed financial terms.
Varner and her grandson, Lonnie Tinsley, 48, sued El Reno, Okla., and its police officers after the Dec. 22, 2009, incident.
Police said they came to her apartment after being told she might be attempting suicide by drug overdose.
Officer Thomas Duran said Varner pulled a kitchen knife from under her pillow and said, "If you try and get the knife, I will stab you and kill you."
Duran said he used his Taser first, without much effect, and another officer used a second Taser against her several times.
Giving a deposition in January, Varner denied any threats to police or a suicide attempt. She said medication interactions had made her lightheaded.
She also said officers stepped on her oxygen hose after the first Taser attempt.
Tinsley said police roughly handcuffed him when he tried to protect his grandmother.
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