The 30-year-old was reportedly removed from the show over fears viewers would not understand her Newcastle accent.
She sued producers Blue Orbit for $2.3m (£1.4m) for loss of earnings earlier this year.
The case has now been settled out-of-court, with the production company paying Cole an undisclosed sum.
Cole was replaced by Nicole Scherzinger in May 2011, after attending X Factor auditions in two US cities.
Her footage was used in the first hour of the show’s premiere later that year, leaving some US critics confused.
The Chicago Tribune said Scherzinger was not “an obvious improvement”, while the Los Angeles Times complimented Cole’s “fabulous Geordie accent”.
According to legal papers filed in Los Angeles Superior Court, the singer was promised a salary of $1.8m (£1.1m) for the first season, and an additional $2m (£1.2m) for the second.
The contract was a so-called “pay or play” deal, where the salary is payable, even if the star is let go.
In her legal case, Cole said she had been paid for the first series, but the rest of her salary was not forthcoming.
She was also not paid further expenses, including a $100,000 (£61,000) wardrobe allowance, a $25,000 (£15,000) allowance for her stylist, $15,000 (£9,200) per month for a hotel or apartment in L.A. and a $2,500 (£1,530) monthly living allowance.
Her legal case asked for the money, plus interest, legal fees and “further relief as the court may deem just and appropriate”.
The singer’s spokesman could not disclose details of the settlement but confirmed to the BBC: “Cheryl’s dispute with Blue Orbit has been resolved amicably”.
Blue Orbit did not make a comment.