No further details of the deal will be made public, a statement from both sides said.
The 68-year-old rock legend underwent emergency surgery and was briefly put into an artificial coma in December 2009 in Los Angeles, after falling ill on the flight from Paris where he had a hernia operation days before.
He and his insurance companies sued the French doctor responsible for the original operation, claiming negligence and loss of earnings in the United States.
Halliday had undergone an initial operation at the hands of Stephane Delajoux, known as a surgeon to the stars, in late November 2009.
Days later, he was forced to undergo a second operation, on the eve of a flight to the United States.
The surgeon said he had warned Halliday against travelling so soon after his operation.
Hallyday is by far the best known rock star in France, with a colourful rock ‘n’ roll lifestyle. He was born to a Belgian father in Paris but has homes in Los Angeles and Switzerland.
Known as the “French Elvis”, he has sold more than 100 million albums and played 45 major tours, selling out numerous stadiums.