Free Peers Inc have agreed to pay $30 million (£16.2 million) to avoid legal action from the music industry.
The company, who are behind the US-based file-sharing service BearShare have agreed that they will no longer operate any unlicensed online music services.
According to court documents filed in Los Angeles, it will also sell its technology, user data and rights to the BearShare domain name to another company.
However, according to BBC News, four other companies facing legal action from the music industry have yet to settle and the firms behind the file-sharing services Kazaa and Morpheus are set to fight a copyright case in Los Angeles.
The music industry had sent letters to seven companies – including Free Peers Inc – threatening them with legal action if they did not stop operating.
A subsidiary of a former-distributor of file-sharing software until they settled in 2004, iMesh, have taken over the operation.
It is believed that the company had been in talks for some time to get hold of the BearShare technology.
iMesh is now a licensed online music provider, following the $4 million (£2.1 million) agreement it reached with the music industry.
In a landmark ruling last year, the US Supreme Court ruled that file-sharing companies would be liable for legal action, as well as the users themselves.
An alliance of Hollywood film studios and recording companies sued Grockster five years ago.
The file-sharing company last year agreed to settle last year and paid $50 million (£27 million).