The settlement was filed in Brooklyn, said lawyer Haeyoung Yoon, who represents Ehab Elmaghraby. She said she believed it was the first settlement involving the claims of people detained after the attacks.
Mr Elmaghraby, a former restaurant worker, was held at the Metropolitan Detention Centre in Brooklyn from October 1, 2001, until August 2002, Yoon said.
He was not charged with any crime connected to terrorism, but pleaded guilty to credit card fraud and was deported in August 2003.
In a lawsuit filed in August, 2004, Mr Elmaghraby and a Pakistani man, Javaid Iqbal, claimed their rights were violated in US custody and sought compensatory damages. They also argued that the government wouldn’t let them appeal against their solitary confinement in a special unit of the detention centre.
Their lawsuit named former US Attorney General John Ashcroft and dozens of other federal officials.
Mr Elmaghraby said he was shackled, shoved into walls, punched and called a terrorist.
While in custody, Mr Elmaghraby’s thyroid condition was misdiagnosed as asthma, worsening it, Ms Yoon said. He wanted to continue with the lawsuit, but settled because of his medical costs, she said.
“Despite the fact that the US admitted no wrongdoing,” Ms Yoon said, “they are compensating Mr Elmaghraby for the injuries he suffered.”
The Metropolitan Detention Centre was cited for brutal treatment of detainees in a 2003 report by the Department of Justice’s inspector general.
The settlement, first reported by The New York Times, must be approved by a federal judge. Mr Iqbal’s case against the government continues.
A federal judge in September, 2005, rejected a claim by Mr Ashcroft that the lawsuit should be dismissed, partly because the threat of foreign terrorism exempts the government from following rules made in peacetime.
Mr Ashcroft said in a response to the lawsuit that the threat of terrorist attacks meant the government should not have been required to follow regulations allowing inmates to appeal assignment to the special unit.
More than 80 men were classified as suspected terrorists and were jailed in high-security cells at the Brooklyn facility between September 14, 2001, and August 27, 2002.
A separate class action lawsuit was filed in federal court in Brooklyn in 2002 on behalf of hundreds of detainees in Brooklyn and New Jersey.
In that lawsuit, the Centre for Constitutional Rights charged that Mr Ashcroft, and other officials, subjected prisoners to excessively harsh conditions though they had not been charged with crimes.