Brenda Wernikoff, 60, said in a federal lawsuit police were called by an employee at the Woods Mullen homeless shelter where she had lived for a year because she was using the women's restroom.
She was arrested for disorderly conduct, though during the booking, she said the five male officers humiliated her by removing her shirt.
"The officers then ordered Ms. Wernikoff to jump up and down, causing her breasts to jiggle," the suit said of the 2010 incident.
The officers denied the incident, though the city agreed to the $20,000 settlement and officials are meeting with the Massachusetts Transgender Political Coalition to evaluate its policies and training in such incidents, the Boston Globe reported Monday.
Meanwhile, the homeless shelter has agreed to pay Wernikoff an additional $10,000 for its involvement in the incident. The shelter's policy is to allow people to use restrooms based on their gender identity, the Globe said. The employee who called police, Margaretta Collins, said she was instructed to do so by her supervisor.
"If [Collins] was unfortunately given that advice by her supervisor that would have been a mistake," said Nick Martin, the Boston Public Health Commission spokesman.