Tom Carver reports: "He was the only person to capture the moment on tape"

The payment is being made to the relatives of amateur cameraman Abraham Zapruder in compensation for the loss of the film, which was declared a permanent possession of the American people in 1997.

The binding decision by an arbitration board follows years of disagreement over the film's value.

Abraham Zapruder told how he returned to his office screaming: "They killed him!"

The family were reported to have been asking for $30m, saying the material should be viewed as a work of art.

Government lawyers valued it at no more than $1.4m - equivalent to the highest amount paid for a single item at a 1996 auction of possessions of the former first lady Jacqueline Kennedy.

The $16m does not include payment for the copyright of the film, which is retained by the family.

Conspiracy theories

Mr Zapruder's eight-millimetre home movie camera captured the assassination of President Kennedy in Dallas on 22 November 1963.

Conspiracy theories surround the death of the president

Mr Zapruder, a dress manufacturer, was standing near the now infamous grassy knoll in Dealey Plaza as the president's motorcade drove past and shots rang out.

The images from the film - just 26 seconds long - have helped launch a hundred conspiracy theories.

A piece of the film was used by director Oliver Stone in his 1991 movie, JFK.

The Zapruders last year released a video version of the original film at $20 a copy.

The film, one of the most significant documents in US history, is kept in a freezer in a federal archive.

'Good deal'

The Zapruder family welcomed the deal.

The BBC's Paul Reynolds: "Zapruder took one of the most famous pieces of film in American history"

Their lawyer, Robert Bennett, said they were "pleased with the thorough and thoughtful decision".

Mr Bennett, who represented President Clinton in the Paula Jones sexual harassment case, said the family had rejected the opportunity to sell the film at auction to the highest bidder, believing it should remain in the possession of the US.

Zapruder family members said the decision was "fair and reasonable".

'Most tragic event'

Jeff West, the director of the Sixth Floor Museum in Dallas, which commemorates President Kennedy's life and death on the site where he was shot, called it a "good, fair price for the family and the government".

"If you put [the film] on the auction block, I'm sure it would bring in a lot more than $16m, but then the government wouldn't have it," he said.

The Sixth Floor Museum is located in the former Texas School Book Depository from where Lee Harvey Oswald, the man officially recognised as the assassin, fired at President Kennedy.

Acting Assistant Attorney-General David Ogden said the resolution of the dispute "ensures that this evidence of one of the most tragic events in American history will be protected for scholarly and research uses".

The Justice Department said the announcement of the sale had been delayed while the Kennedy family mourned the death of John F Kennedy Junior, the late president's son.