Freeman, 72, suffered a broken arm, elbow and minor shoulder damage when his car veered off the road in a late-night single vehicle crash near Ruleville, Mississippi in August 2008.
His passenger, Demaris Meyer, had sued Freeman in the US District Court in Mississippi for compensation, saying the injuries and trauma she sustained in the crash left her unable to work.
Meyer, who had to be cut out of wreckage of the vehicle by responders, suffered broken bones and head injuries which had left her with cognitive difficulties and short term memory loss, according to earlier statements.
The case has now been dismissed after both parties agreed an out-of-court settlement, Meyer's lawyer Gloria Allred said Friday.
"Ms Meyer is pleased that the matter is resolved and the case is settled," Allred said in an email to AFP.
Freeman won an Academy Award for his role in 2004's Clint Eastwood boxing drama "Million Dollar Baby" and is famous for his authoritative voice that has been used to narrate documentaries and commercials as well as film roles.
He has been nominated for an Oscar a total of four times.
Freeman will soon be seen in another collaboration with Eastwood, "Invictus," a film based on the 1995 Rugby World Cup. Freeman portrays former South African president Nelson Mandela.
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