More than 1,900 Manus Island detainees had alleged they suffered serious physical and psychological injuries during their time on the Papua New Guinea island.
Australian law firm Slater and Gordon, who represented the plaintiffs, confirmed Wednesday a deal had been struck with the government, although it had yet to be approved by the court.
35-year-old Iranian Majid Kamasaee, who was detained on the center for 11 months after fleeing Iran, was the lead plaintiff in the case.