The Board of Deputies of British Jews has settled out of court with Palestinian relief charity Interpal after branding it a "terrorist organisation".
The board published a retraction on its website, which stated "we should not have described Interpal in this way and we regret the distress our item caused".
Interpal, a UK-registered charity, launched libel proceedings after an article was published on the board's website in 2003 that referred to "terrorist organisations such as Hamas and Interpal".
Ibrahim Hewitt, chairman of trustees at Interpal, said: "We are glad that we can now put the Board of Deputies' attack on the charity behind us and can focus our energies on Interpal's essential relief work." The size of the settlement is to remain confidential at the insistence of the board.
In 2003, the US government described Interpal as a "specially designated global terrorist". The Charity Commission launched an investigation but exonerated the charity.
Interpal said it was trying to meet US government officials to have its name removed from its list of terrorist organisations.
A spokesman for the charity said: "Although being on the list is not welcome, Interpal does not raise funds in the US, so it doesn't impede our work. Whether this libel case will change minds in the US, we can't be sure."