The headmistress at her girls' school in South Africa sued Winfrey over remarks she made while suspending the woman amid abuse complaints in 2007.
Officials with Harpo, Winfrey's production company, say the two sat down "woman to woman without their lawyers" and "reached a conclusion."
A trial was set to get underway in Philadelphia next week.
Details of the settlement have not been made public.
Harpo's full statement:"The two parties met woman to woman without their lawyers and are happy that they could resolve this dispute peacefully to their mutual satisfaction. Ms. Winfrey testified in her deposition that she did not intend the implications placed on her words by the plaintiff. Ms. Mzamane testified in her deposition that she has no evidence that Ms. Winfrey knowingly made a false statement about her or entertained serious doubt about the truth of what she said. We are pleased both parties have reached a conclusion."
-- Charles L. "Chip" Babcock and Nancy W. Hamilton, Attorneys on behalf of Oprah Winfrey and Harpo, and Timothy McGowan and Matthew Reber, Attorneys on behalf of Lerato Nomvuyo Mzamane