Yvonne Mosquito, the West Midlands Deputy PCC, was suspended after visiting a murder victim's family without informing officers.
Following a disciplinary in May 2016, Ms Mosquito had an employment tribunal listed to take place in May 2017.
A joint statement said "all outstanding matters" were resolved.
A BBC source said Ms Mosquito had received a payout. The Office of the Police and Crime Commissioner said it would not comment on whether money had exchanged hands.
Allegations against Ms Mosquito related to a visit she paid to the family of Kenichi Phillips, 18, who was shot dead in a car in Birmingham, on 17 March 2016.
Police and Crime Commissioner David Jamieson said her actions "caused ongoing upset and distress" and "damaged the relationship" between the family and police "in the middle of a complex and sensitive murder investigation".
Her supporters insisted she visited as an ordained minister who wanted to offer condolences to relatives.
Her union Unite rejected the allegations, saying it was "deplorable" the hearing went ahead in Ms Mosquito's absence.
She was issued with a final written warning and her contract was never renewed.
The BBC previously reported Ms Mosquito wrote a letter of complaint about the PCC's behaviour towards her, of which the PCC was aware, four weeks before her suspension.
A joint statement issued by the Office of the Police and Crime Commissioner (PCC) and Ms Mosquito said they were "happy to announce that they have amicably settled all outstanding matters between them".
"Litigation is a stressful business and the parties acknowledge and regret the effects that inevitably follow from that," it added.
The former colleagues thanked each other for their work around issues of equality, the statement added.
A row between a Police and Crime Commissioner and his deputy, who was found guilty of serious misconduct, has been resolved following a payout.