Matt Bissonette failed to get clearance from the Pentagon before the book No Easy Day was published in 2012.
He has agreed to forfeit all profits and royalties, as well as film rights and speaking fees.
In exchange, the government will dismiss other liability claims.
The al-Qaeda leader was killed in a May 2011 Navy Seal raid on his compound in Abbottabad, Pakistan, and his body was buried at sea.
Navy Seals – special operations commandos – usually abide by a code of silence and do not publicly take credit for their actions.
In the settlement filed at a district court in state of Virginia, Mr Bissonette acknowledged he had failed to submit his book for review ahead of publication.
He also apologised, saying in a statement that he had acted on the incorrect advice of his lawyer.
“It was a serious error that I urge others not to repeat,” CBS news quoted him as saying.
“Although I never intended to endanger my former colleagues, I now recognise that failing to seek pre-publication review could place them and their families at greater risk, for which I especially apologise.”
The former commando, who wrote under the pseudonym Mark Owen, will have four years to pay the bulk of the money to the government, according to the Associated Press news agency.
He has 30 days to pay $100,000 made from presentations he gave using slides that were not approved by the Pentagon, it says.
His account of the Abbottabad raid has been questioned by another member of the elite Seal Team 6 unit that carried out the operation, who has a different version of how Bin Laden was shot dead.