The lawsuit by former headmistress Nomvuyo Mzamane claimed Winfrey defamed her in remarks made in the wake of a 2007 sex-abuse scandal at the school.
The headmistress said she had trouble finding a job after. A trial had been set to start next week.
A joint statement released Tuesday by lawyers for both sides says Winfrey and Mzamane met "woman to woman" and resolved their differences.
When news of the scandal broke in 2007, Winfrey said she had "lost confidence" in Mzamane and was "cleaning house from top to bottom." Mzamane claimed she didn't know about any sexual abuse.
A dorm matron at the Oprah Winfrey Leadership Academy for Girls has been charged with abusing six students. Winfrey has called the allegations crushing given her own stated history of childhood sexual abuse.
The dorm matron, Tiny Virginia Makopo, has pleaded not guilty to 14 charges
Winfrey and several schoolgirls were expected to testify at the defamation trial.