The settlement was announced by Fox, Dominion and the judge in the case at the 11th hour, with a 12-person jury selected on Tuesday morning and the case poised to kick off with opening statements on Tuesday afternoon.
Dominion had sought $US1.6 billion in damages in the lawsuit filed in 2021, with Delaware Superior Court Judge Eric Davis presiding over the case in Wilmington.
Dominion's CEO disclosed the settlement figure and said Fox had admitted to telling lies about his company.
"We acknowledge the court's rulings finding certain claims about Dominion to be false. This settlement reflects Fox's continued commitment to the highest journalistic standards. We are hopeful that our decision to resolve this dispute with Dominion amicably, instead of the acrimony of a divisive trial, allows the country to move forward from these issues," Fox said in a statement.
At issue in the lawsuit was whether Fox was liable for airing the false claims that Denver-based Dominion's ballot-counting machines were used to manipulate the 2020 US election in favour of Democrat Joe Biden over Republican then-president Donald Trump.
Dominion argued that these on-air claims caused the company "enormous and irreparable economic harm".
Davis had ordered a one-day trial postponement on Monday before another delay on Tuesday, apparently as the two sides hammered out a deal.
The deal spares Fox the peril of having some of its best-known figures called to the witness stand and subjected to potentially withering questioning, including executives such as Rupert Murdoch, the 92-year-old media mogul who serves as Fox Corp chairman, and Fox CEO Suzanne Scott as well as on-air hosts including Tucker Carlson, Sean Hannity and Jeanine Pirro.
The decision to settle also followed a ruling by the judge last month that Fox could not invoke free speech protections under the US constitution in its defence.
Fox News is the most-watched US cable news network, according to Nielsen.
The primary question for jurors was to be whether Fox knowingly spread false information or recklessly disregarded the truth, the standard of "actual malice" that Dominion must show to prevail in a defamation case.
In February court filings, Dominion cited a trove of internal communications in which Murdoch and other Fox figures privately acknowledged that the vote-rigging claims made about Dominion on-air were false.
Dominion said Fox amplified the untrue claims to boost its ratings and prevent its viewers from migrating to other conservative-leaning media competitors including One America News Network, which Dominion is suing separately.
Adding to the legal risks for Fox, another US voting technology company, Smartmatic, is pursuing its own defamation lawsuit seeking $US2.7 billion in damages in a New York state court.
Fox Corp reported nearly $US14 billion in annual revenue last year.
Fox had argued that claims by Trump and his lawyers about the election were inherently newsworthy and protected by the Constitution's First Amendment.
Davis ruled in March that Fox could not use those arguments, finding its coverage was false, defamatory and not protected by the first amendment.
Dominion obtained internal communications and testimony from Murdoch and other Fox News executives and commentators.
Murdoch internally described the election-rigging claims as "really crazy" and "damaging" but declined to wield his editorial power to stop them and conceded under oath that some Fox hosts nonetheless "endorsed" the claims, Dominion told the court in a filing.
