The settlement still needs a federal judge's approval.
Toyota announced the agreement Wednesday afternoon.
According to plaintiffs' attorney Steve Berman, the settlement is worth more than $1 billion. That would make it the largest settlement in U.S. history involving automobile defects.
Toyota released a statement Wednesday: "If this economic loss settlement is approved by the judge supervising multidistrict litigation pending in the U.S. District Court for the Central District of California, Toyota will launch a new customer-support program that will provide prospective supplemental coverage for certain vehicle components and will retrofit additional non-hybrid vehicle models subject to the floor mat recall with a free brake override system (BOS) to provide an added measure of confidence.
"Further, assuming any appeals are resolved in favor of the settlement, Toyota will offer cash payments to eligible customers who sold or turned-in their leased vehicles in a period during 2009-2010, as well as other specified persons, and to eligible current owners and lessees who will not be offered BOS. The proposed settlement would also establish additional driver education programs and fund new research into advanced safety technologies.
"Toyota also announced that it will take a one-time, $1.1 billion pre-tax charge against earnings to cover the estimated costs of the economic loss settlement and possible resolution costs of civil litigation brought in California by the District Attorney of Orange County and an investigation by a multi-state group of Attorneys General stemming from previous recalls."
U.S. District Judge James Selna is expected to review the proposed settlement on Dec. 28, 2012, and if he agrees with its fairness, will grant preliminary approval, according to a Toyota representative.
More than 14 million vehicles have been recalled worldwide by Toyota due to acceleration problems in several models. The Prius hybrid has seen recalls due to brake defects.
The acceleration problems were blamed by Toyota on driver error, faulty floor mats and sticky accelerator pedals. Vehicles reportedly accelerated on their own.
Hundreds of lawsuits have been filed against Toyota since 2009, when the Japanese automaker started receiving numerous complaints that its cars accelerated on their own, causing crashes, injuries and even deaths.
The cases were consolidated in U.S. District Court in Santa Ana and divided into two categories: economic loss and wrongful death. Claims by people who seek compensation for injury and death due to sudden acceleration are not part of the settlement; the first trial involving those suits is scheduled for February.
As part of the economic loss settlement, Toyota will offer cash payments from a pool of about $250 million to eligible customers who sold vehicles or turned in leased vehicles between September 2009 and December 2010.
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 Associated Press contributed to this report.