Sir Elton John has accepted undisclosed libel damages from the Sunday Times over a claim in the newspaper regarding the star's behaviour at a charity ball.
Sir Elton John sued two British newspapers over the allegations
The allegations caused him "distress and embarrassment", his lawyer said.
The paper erroneously repeated an entirely false rumour that he acted in a rude, self-important and arrogant manner, his lawyer told the court.
She added the paper falsely said Sir Elton issued an absurd edict to guests not to address him unless spoken to.
Sir Elton sued the Sunday Times for reprinting content which first appeared in the Daily Mail on 24 June 2005.
The Mail is also facing legal action over publishing the story branded "entirely false" by his spokesman.
The musician was not at London's High Court to hear about the settlement of his action, which he has pledged to the Elton John Aids Foundation.
Times Newspapers Ltd acknowledged that the allegation should not have gone to print, publicly withdrew it and apologised for the distress it had caused Sir Elton.
The newspaper's lawyer, Alistair Brett, said: "As soon as the defendant found out the story was untrue - it had been picked up from another newspaper - it immediately apologised to Sir Elton and it is happy to repeat that apology here today."
They will also have to pay the singer's legal costs.
The original story concerned the annual White Tie and Tiara Ball fund-raiser hosted by the chart-topping star, which was attended by a number of celebrities.
The songwriter felt that the story had affected the image and reputation of his fund-raising efforts, and said legal action would be taken elsewhere if the allegations were repeated.
Sir Elton won an estimated £1m in libel damages in 1987 from The Sun newspaper.
He made an out-of-court settlement for allegations printed in the paper, which printed a front page apology.