Levein was removed from his post on full pay in November but then resigned and launched legal action over compensation.
A statement read: "The Scottish FA and Craig Levein confirm that a mutually acceptable settlement has been reached for an undisclosed sum in relation to Craig's contract with the Scottish FA. The Scottish FA wishes Craig well for the future. No further comment will be made on this matter."
Levein's contract had been due to run until next year's World Cup, which Scotland can no longer qualify for following a 2-0 defeat in Serbia on Tuesday, their fourth consecutive qualifying defeat.