TESCO Ireland has agreed to pay its rival Aldi €150,000 in damages for inaccurately comparing prices.
The supermarket giant has also given an undertaking not to mislead customers when listing the price difference of its stock against products from the discount retailer.
Aldi has said it will give the payout to the St Vincent de Paul voluntary organisation.
Niall O'Connor, of Aldi Stores (Ireland), said: "The effect of today's undertakings is that consumers can expect and demand clear, transparent and accurate information on comparative advertising to enable them to make properly informed decisions about what they buy and who they buy from."
The settlement was agreed before Mr Justice Peter Kelly in the Commercial Division of the High Court, just days ahead of a hearing.
Tesco agreed not to compare the prices of entirely different products or weights in its stores.
One example given was a price difference between marmalade and tuna chunks.
Aldi said it had no choice but to take legal action after the chain repeatedly brought the matter to the attention of Tesco over the last three years.
"Aldi was disappointed that no action appeared to have been taken and Tesco continued, to which may have had the effect of inducing consumers into making purchasing decisions they may not otherwise have made," a spokesman said.
"Aldi, therefore, regrettably had no alternative but to issue proceedings for trademark infringement."
Aldi said it is in favour of comparative advertising, but stressed it must be accurate, fair and cannot mislead the consumer.
"The substantial damages we are to receive from Tesco under the settlement will be forwarded to our nominated charity, St Vincent de Paul," a spokesman added.
Tesco Ireland will also pay Aldi's court costs.