Former Australia Post boss Christine Holgate will receive a $1 million settlement for losing her job more than nine months after the acrimonious split.
Ms Holgate left the organisation last year following a scandal over four luxury watches worth $20,000 being gifted to executives.
Australia Post has also agreed to pay $100,000 of the former chief executive officer's legal costs under a deal struck following mediation.
In a joint statement on Wednesday, both parties revealed that Ms Holgate would receive $1 million as a taxable employment termination payment.
"To finalise the matter so that both parties can move on, Ms Holgate has released Australia Post from all legal claims and Australia Post is making the payment without any admission of liability," the statement read.
Australia Post acknowledged it lost an effective chief executive following October 22 when a furore erupted over the Cartier watches.
"Australia Post regrets the difficult circumstances surrounding Ms Holgate's departure from her role as CEO," the statement said.
The parties entered mediation after Ms Holgate claimed she was bullied and unlawfully stood aside.
The settlement aims to draw the line under an explosive corporate and political dispute engulfing the government business enterprise.
Australia Post chair Lucio Di Bartolomeo resisted calls to resign after a parliamentary report called for him to fall on his sword.
Mr Di Bartolomeo was adamant Ms Holgate chose to stand aside during an investigation into the saga.
Scott Morrison infamously stood up during Question Time hours after the gifts were revealed and called on Ms Holgate to stand aside.
"If she doesn't wish to do that, she can go," he said.
The watches were revealed at a Senate estimates hearing in October last year after Labor's Kimberley Kitching pursued the issue.
Opposition communications spokeswoman Michelle Rowland attacked Mr Morrison for "unsubstantiated taunts" driven by panic and politics.
"The prime minister diminished himself with that juvenile and premeditated display, and his double standards about taxpayers' money are there for everyone to see," she said.
Greens senator Sarah Hanson-Young called for Mr Morrison to apologise and accused the government's treatment of Ms Holgate of costing taxpayers,
"Ms Holgate's treatment has exposed the sexism and hypocrisy in the corridors of power here in parliament," she said.
Mr Morrison has previously said he regretted the distress his "strong language" caused but did not apologise.
He argued his condemnation was about a serious issue of taxpayers' money being used inappropriately.
In explosive evidence during a parliamentary hearing, Ms Holgate revealed she was suicidal after being forced out.
"I lost my job, a job that I loved, because I was humiliated by our prime minister for committing no offence and then bullied by my chairman," she told the committee.
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Australian Associated Press