Lincolnshire Police are thought to have paid Dena Fleming up to pounds 60,000 after a two-year legal battle.
Inspector Fleming, 39, claimed that a "whispering campaign" began after she spurned one officer's sexual advances and gave another a poor appraisal.
She was suspended on full pay for more than two years after putting a tape recorder in her locker to catch alleged offenders. She eventually sued her force for sexual harassment.
In February an industrial tribunal ruled against her claims of sex discrimination but said she had been victimised after making them and ordered that all disciplinary charges should be dropped.
Lincolnshire Police formally agreed terms as the case was due to be heard at an industrial tribunal in Nottingham yesterday.
Both sides have agreed not to comment on the case as part of the undisclosed compensation settlement but, as part of the deal, a letter from Lincolnshire's new Chief Constable, Richard Childs, was released yesterday.
It said: "I give an assurance that the issues which have arisen are being addressed as a matter of urgency. The Lincolnshire Police are sorry for any distress caused to you."
In March Inspector Fleming was reinstated and moved to the Humberside force where her husband Max was a constable. All disciplinary charges were dropped, but Inspector Fleming is understood to have claimed for hurt feelings and potential loss of earnings as she was unable to apply for promotion during her suspension.
An investigation into Lincolnshire's handling of the case - carried out by Humberside Chief Constable Tony Leonard - has never been made public.
A press statement issued yesterday said it was the Lincolnshire Chief Constable's intention to ensure that no officer in the future would experience distress as suffered by Inspector Fleming.Reuse content