Sheen had filed a $US100 million lawsuit against the studio behind the CBS comedy and its creator Chuck Lorre after he was fired from the show in March.
Warner Bros. did not put a figure on the settlement. The case had been settled through arbitration.
"Warner Bros. Television, Chuck Lorre and Charlie Sheen have resolved their dispute to the parties' mutual satisfaction. The pending lawsuit and arbitration will be dismissed as to all parties. The parties have agreed to maintain confidentiality over the terms of the settlement," Warner Bros said in a statement.
Sheen, the highest-paid actor on US television, was fired from "Two and A Half Men" after publicly insulting Lorre in a series of bizarre interviews. His remarks followed a series of trips to rehab that had forced production on the TV comedy to be suspended in early 2011.
Monday's settlement announcement followed months of acrimonious exchanges, tempered by contrite appearances by Sheen on TV talk shows and at The Emmys in the last two weeks.
Sheen was replaced on "Two and A Half Men" by Ashton Kutcher. The new season debuted last week to a record 28.7 million US viewers -- a bigger audience than any episodes in the comedy's first eight seasons with Sheen in the starring role as a womanizing bachelor.
