The company also will launch a $250 million program for 16 million current owners to provide supplemental warranty coverage for certain vehicle components, and it will retrofit about 3.2 million vehicles with a brake override system. An override system is designed to ensure a car will stop when the brakes are applied, even if the accelerator pedal is depressed.
The settlement would also establish additional driver education programs and fund new research into advanced safety technologies.
"In keeping with our core principles, we have structured this agreement in ways that work to put our customers first and demonstrate that they can count on Toyota to stand behind our vehicles," said Christopher Reynolds, Toyota vice president and general counsel.
Current and former Toyota owners are expected to receive more information about the settlement in the coming months.
Plaintiffs' attorneys have spent the past two years deposing Toyota employees, poring over thousands of documents and reviewing software code, but the company maintains those lawyers have been unable to prove that a design defect — namely Toyota's electronic throttle control system — was responsible for vehicles surging unexpectedly.
Both the National Highway Traffic Safety Administration and NASA were unable to find any defects in Toyota's source code that could cause problems.
The company has been dogged by fines for not reporting problems in a timely manner.
Earlier this month, NHTSA doled out a record $17.4 million fine to Toyota for failing to quickly report floor mat problems with some of its Lexus models. Toyota paid a total of $48.8 million in fines for three violations in 2010.
Toyota President Akio Toyoda appeared before Congress last year and pledged to strengthen quality control. Recent sales figures show the company appears to have rebounded following its safety issues.
Settlement website: http://www.ToyotaELsettlement.com