Creative last May filed a lawsuit against the iPod maker, alleging that Apple infringed on a patent that Creative had applied for in 2001 and was awarded in August 2005. The company demanded that Apple ceased all production and sales of its iPod portable media players.
Apple responded with a counter-claim, alleging that Creative had infringed on four of its iPod patents.
The settlement ends all legal actions and will grant Apple with a licence to use Creative's patents in all its products.
Under terms of the agreement, Creative also joined Apple's " Made for iPod" programme, allowing the company to manufacturer iPod accessories.
"Creative is very fortunate to have been granted this early patent," Apple chief executive Steve Jobs said in a press release.
"This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation."
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