Cellphone video of Dao being physically removed from the April 9 flight quickly went viral.
The footage showed airport police officers pulling the 69-year-old father of five from his seat and dragging him down the aisle. His lawyer says he lost teeth and suffered a broken nose and a concussion.
Dao's attorney said that the amount remains confidential as one of the provisions of the settlement. He also praised United CEO Oscar Munoz.
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"Mr. Munoz said he was going to do the right thing, and he has. In addition, United has taken full responsibility for what happened on Flight 3411, without attempting to blame others, including the City of Chicago. For this acceptance of corporate accountability, United is to be applauded," said attorney Thomas Demetrio.
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United announced changes to its customer policies Thursday.
The changes include not calling police to remove passengers from overbooked flights, not requiring seated customers to involuntarily get off the plane and offering up to $10,000 to bumped fliers.
VIDEO: Air travelers say United taking right step with changes
Also Thursday, the troubled airline released a report detailing mistakes that led to the incident involving Dao and announced other policy changes including:
-Establishing a customer solutions team.
-Ensuring that crews are booked onto a flight at least 60 minutes before departure.
-Giving employees additional annual training.
-Creating an automated system for encouraging volunteers to change travel plans.
-Empowering employees to quickly resolve customer service issues.
-Reimbursing $1,500 to any passenger whose bag is misplaced.
Dao applauded the airline's announcement in a statement from his lawyer saying, in part:
"All of its policy changes announced today are passenger friendly and are simple, commonsense decisions on United's part to help minimize the stress involved in the flying experience. Dr. Dao is proud, despite his ordeal, to have played a role in spearheading these announced changes."
The Associated Press and KTRK-TV contributed to this report.