Derek Fenton of Bloomingdale, a supervisor for NJ Transit, also will get $25,000 for pain and suffering, the American Civil Liberties Union of New Jersey said Thursday.
"In America, we have the right to burn all kinds of things -- letters, flags, books, Bibles and Korans," said Deborah Jacobs, executive director of the ACLU-NJ.
Fenton, 40, was fired two days after the demonstration against a proposed Muslim community center and mosque near the World Trade Center site in New York. He was accused of violating NJ Transit's employee code of ethics.
When the ACLU filed the federal suit in February, Gov. Chris Christie said: "That kind of intolerance is something I think is unacceptable. So I don't have any problem with him being fired. You've got to make decisions in this job. I made one."
Christie's office and the state attorney general did not respond to calls from The New York Times for comment on the settlement Friday.
Fenton's lawyers also won a guarantee he would not undergo extra "sensitivity training" when he returns to work.