Actress Cameron Diaz has accepted "substantial" libel damages over a UK newspaper story which alleged she was having an affair with a married man.
Ms Diaz suffered "distress", her lawyer said
Ms Diaz, 32, sued News Group Newspapers, publishers of The Sun, over a story published in May 2005.
Following an investigation The Sun has admitted "any suggestion of a romantic involvement is entirely untrue and without any substance whatsoever".
Charlie's Angels star Diaz has dated singer Justin Timberlake since 2003.
The article in The Sun claimed: "Justin Timberlake's bride-to-be Cameron Diaz has been caught snogging a married man."
The man was reported to be her MTV colleague Shane Nickerson.
"It was explained to the reader that he was a married man, married to a high school teacher and that he was also the father of a one-year-old daughter," Ms Diaz's lawyer Simon Smith told the High Court in London.
Readers were informed, said Mr Smith, that "they have enjoyed more than just a professional relationship".
The article went on to say the actress had been caught out "while her pop star fiance prepared to go into hospital for a throat operation".
However, The Sun has since accepted that "the relevant incident involved no more than Ms Diaz giving a friend a goodbye hug".
Ms Diaz has been dating Justin Timberlake for more than two years
"The publication of these allegations has caused damage to the claimant's personal and professional reputation, in addition to obvious distress to both herself, Mr Timberlake, Mr Nickerson and his wife," said Mr Smith.
News Group Newspapers has agreed to pay undisclosed damages to the actress and reimburse her legal costs.
"In those circumstances and in light of this vindication my client is prepared not to proceed any further against The Sun newspaper."
The hearing did not concern a second defendant, American Media Inc, publisher of the National Enquirer magazine, "against whom these proceedings will continue", said Mr Smith.
News Group Newspapers lawyer Benjamin Beabey told Mr Justice Eady The Sun's story was based upon the earlier report in the National Enquirer.
"It entirely accepts that the allegations are without foundation and ought never to have been published."
Earlier this week, Ms Diaz saw photographer John Rutter found guilty of trying to sell topless photos of the actress in 2003.
Mr Rutter was convicted in a Los Angeles court of forgery, attempted grand theft and perjury. He is due to be sentenced on 15 September.