Diarra had been seeking 65 million euros ($75 million) in damages from FIFA and the Belgian FA after the European Union's top court (CJEU) ruled in October that some world soccer body rules breached EU laws.
FIFA had fined Diarra 10 million euros after the former Arsenal, Chelsea and Real Madrid player left Lokomotiv Moscow one year into a four-year contract in 2014.
"Following the global agreement they have reached, Mr Lassana Diarra and FIFA have settled all legal proceedings between them," FIFA said in a statement.
"FIFA has not made any admission of liability nor payment by way of compensation. FIFA will not be providing any further comment at this time."
Diarra's lawyers have yet to respond to a Reuters request for comment.
FIFA later amended its transfer regulations after the CJEU ruling, adopting an interim framework on the calculation of compensation payable and burden of proof if there is a breach of contract.
The "Diarra ruling" has since prompted about 20 European national player unions to pledge their support to a Europe-wide class action against FIFA.