Santos' attorney Bruce Rogow said his client was "pleased" with terms of the settlement, which are confidential. Santos will "focus his energies on horses" now that the lawsuit is over, Rogow added.
"On behalf of my client, I'd like to say we've settled the lawsuit and both parties are satisfied with the result," Sandy Bohrer, the lawyer representing The Herald, told the newspaper.
Santos sued The Herald for libel in circuit court after the newspaper published a story indicating he may have carried an illegal object in his hand during the 2003 Derby. He was cleared of the allegations by racing officials who found he carried only a whip.
Santos, a native of Chile, retired last year after more than 4,000 racing victories. He was best known for his 2003 victories in the Derby and Preakness with Funny Cide, who finished third in the Belmont Stakes to miss the Triple Crown.