The Daily Mail has agreed to pay TV psychic Sally Morgan £125,000 in damages as well as legal costs over a 2011 story which accused her of being a charlatan.
The settlement comes ahead of an expected libel trial in the long-running case.
Her solicitor Graham Atkins read out a statement at the High Court this morning outlining the terms of the agreed settlement.
He said that Morgan was a psychic who has performed over 600 shows at theatres and venues and also appeared on television.
Following a theatre performance in Dublin in 2011 an article appeared in the Daily mail "in the context of a general attack on psychics as being charlatans", he said.
He added that it "accused Mrs Morgan specifically of having used a hidden earpiece during her performance in order to receive instructions from her team which she then repeated on stage as if she had received them from the spirit world.
"The article thereby suggested that Mrs Morgan had deliberately and dishonestly perpetrated a scam on her audience in Dublin."
He said: "The suggestion that Mrs Morgan had cheated her Dublin audience by using an earpiece had originally arisen during a phone-in programme on Irish radio when two ladies who had attended the Dublin performance mentioned on air that they had been sitting at the back of the auditorium and thought they had heard two crew members saying something which Mrs Morgan had then repeated on stage.
"Following this, Mrs Morgan publicly stated that the suggestion she had cheated using an earpiece was nonsense, as did the theatre itself which put out a very clear press statement denying any scam. The crew members who were said to be part of the scam were sub-contracted by the theatre and were not members of Mrs Morgan's team.
"Despite these denials, the suggestions was repeated by the Daily Mail in an article written by the magician Paul Zenon, which was published in both the online and hard copy issues of the newspaper on 22 September 2011."
He said the allegation Morgan had cheated her audience was "completely false and defamatory of her" and had caused her "enormous distress". The Daily Mail has now accepted the allegation was untrue, he said, and agreed to pay "substantial damages" and libel costs.
Legal costs are likely to be substantial in view of the fact that the case on the brink of going to a three-week trial which had been set to start this month.
Solicitor for the Daily Mail, Brid Jordan, said that the paper "withdraws the suggestion that Mrs Morgan used a secret earpiece at her Dublin show in September 2011 to receive messages from off-stage, thereby cheating her audience, which it accepts is untrue. It apologises unreservedly to Mrs Morgan for publishing the allegation."