The On the Floor hitmaker was slapped with legal action from Hakob Manoukian last year amid allegations he was forced to quit over the way he was treated by his ex-boss' manager Benny Medina. He also claimed he was owed money for additional on-call services both parties agreed to on top of his annual $72,000 salary.
Lopez filed a $20 million countersuit, accusing the driver of demanding $2.8 million (£1.75 million) from her for his silence, insisting he would go public with secrets he overheard while in her employ if she didn't pay up.
Her extortion argument was dismissed by Los Angeles Superior Court Judge Joseph Kalin in December, and now Lopez has agreed to settle the case with Manoukian.
A notice of the settlement was filed in court on 8 February, although the details of the deal have not been disclosed, reports Eonline.com.