Microsoft is to pay $536m (£289m) to software maker Novell to resolve a long-standing complaint over alleged anti-competitive practices.
Microsoft has appealed against the case brought by the EU
The case centred on Novell's Netware software and releases of Microsoft's Windows operating system in the 1990s.
Novell is to withdraw from a European Commission action against Microsoft.
But it is still to pursue a similar case over claims from the mid-1990s when its WordPerfect software was in competition with Microsoft's Office.
In reaching the settlement, Microsoft made no admission of wrongdoing.
It said the agreement resulted from private mediation between the companies.
"Over the past two years, we have made a sustained effort to build more constructive relationships with our industry partners and competitors," said Microsoft lawyer Brad Smith.
In a separate case, Microsoft has reached a settlement with a US industry trade body.
Under the agreement, the Computer and Communications Industry Association (CCIA) will also withdraw its support for the European Commission's anti-trust
case against Microsoft.
A separate complaint to the EC will be withdrawn too, and the CCIA has agreed not to seek a US Supreme Court review of a 2001 ruling in the Justice Department's anti-trust case against the company.
Microsoft will pay the CCIA some legal expenses, and become a member of the organisation.
The two would "work together on important and pressing technology issues facing the high-tech industry", Microsoft said.
Microsoft said the settlement with Novell would reduce its profits for the three months to the end of September by about 13% to $253m.
But the world's largest software maker, with $64.4bn cash and investments on its balance sheet, added still outstanding legal claims against the company could cost it $950m.
Real Networks is now the only company left backing the EC's efforts against Microsoft.
The EC ruled in March that Microsoft had abused its dominant market position but the software giant launched an appeal and has asked that sanctions against it be suspended in the meantime.