The settlement, to be shared by 1,905 people held on Manus Island since 2012, averted a public trial against the government and security providers Transfield and G4S.
A class action sought damages for alleged suffering due to harsh conditions in which detainees were held.
It also called for a payout for false imprisonment after the Papua New Guinea Supreme Court ruled last year that holding asylum-seekers on Manus Island was unconstitutional and illegal.
Lawyers Slater and Gordon said they believed it was the largest human rights class action settlement in Australian history, with the defendants also agreeing to pay costs of more than Aus$20 million.a
"The people detained on Manus Island have endured extremely hostile conditions, but they will no longer suffer in silence," said Andrew Baker, from the law firm.
"While no amount of money could fully recognise the terrible conditions the detainees endured, we hope today’s settlement can begin to provide them with an opportunity to help put this dark chapter of their lives behind them."
The Manus facility opened in 2012 to detain people trying to enter Australia by boat under a tough immigration policy that sends them offshore to be processed.
They are blocked from resettling in Australia even if found to be refugees.
Conditions in the camp, and another one on Nauru in the Pacific, have been widely criticised by refugee advocates and medical professionals, with reports of widespread abuse, self-harm and mental health issues.
Lead plaintiff Majid Kamasaee, an Iranian, welcomed the settlement as an overdue acknowledgement of the suffering he and others endured.
"This case is not just about me, it is about every person who has been trapped on Manus Island,” said Kamasaee, who was held there for 11 months
"I left my home in Iran in 2013 because of religious persecution and I came to Australia seeking peace, but I was sent to Manus, which was hell.
"The way we were treated at the Manus Island detention centre was degrading and cruel."
The government had no immediate response but Slater and Gordon lawyer Rory Walsh told the Australian Broadcasting Corporation the agreement was not an admission of liability from Canberra.
"It denied it was doing the false imprisoning... the Commonwealth defence was that it was the PNG authorities doing the imprisoning and detaining and not them," he said.
"The denial of liability allows the Commonwealth and the defendants to run those positions in any other cases and maintain that position."
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