Former headmistress Nomvuyo Mzamane filed suit against Winfrey in October 2008, claiming Winfrey had defamed her in remarks made following the school's 2007 sex abuse scandal. Mzamane said she had difficulty finding a job afterward.
A trial was scheduled to start next week in Philadelphia, and Winfrey was expected to testify. However, lawyers from both sides issued a statement Tuesday saying Winfrey and Mzamane had resolved their differences.
"The two parties met woman to woman without their lawyers and are happy that they could resolve this dispute peacefully to their mutual satisfaction," said the statement.
Details of the settlement were not disclosed.
In 2007, a dorm matron at the Oprah Winfrey Leadership Academy for Girls was charged with abusing six students. After news of the scandal surfaced in 2007, Winfrey said she had "lost confidence" in Mzamane and was "cleaning house from top to bottom."
Mzamane claimed she was unaware of any sexual abuse.
The dorm matron, Tiny Virginia Makopo, has pleaded not guilty to 14 charges.
Winfrey, who had planned to defend her remarks on the basis of free speech, would have had to attend the trial every day as the defendant in the lawsuit. She had rearranged the taping of her Chicago-based TV show accordingly.
Winfrey's academy for girls has 330 students.