The class-action against Google alleged that Gmail users were automatically enrolled in Buzz and that their data, including most-frequent contacts, was publicly exposed without user consent.
Google's Buzz service drew widespread criticism from privacy groups around the world at its launch, but Google has since revamped the Buzz service so it is not enabled automatically and gives users more control over displaying personal information.
The company has agreed to pay $8.5m into a fund that will be used to support organizations promoting education about privacy on the web, and has committed to step up efforts to educate users about the privacy aspects of Buzz, according to the New York Times.
But none of the people represented in the class-action lawsuit will receive any of the money. "Just to be clear, this is not a settlement in which people who use Gmail can file to receive compensation", Google said in an e-mail to Gmail users.
The company gave no indication of what the lawyers involved in the case will get.
Google said the settlement acknowledges that it quickly changed the Buzz service to address users' concerns.
Anyone who wants to object to the settlement must do so with the United States District Court for the Northern District of California in San Jose before January 10.
Final approval of the proposed settlement will be considered by the court on January 31, 2011.
This story was first published by Computer Weekly