The lawsuit had centered on cases of alleged sexual or physical assault by student-athletes reported by eight female students between 2013 and 2015.
The university had denied permitting a culture of sexual assault to thrive on the campus of 27,845 students.
A lawyer for the plaintiffs said his clients were satisfied the university has made significant progress in sexual assault prevention education and in the way the school responds to assault claims.
"My clients and I are also convinced that the university's leadership is truly committed to continue its exemplary efforts to create a model as it relates to sexual misconduct," attorney David Randolph Smith said.
University Chancellor Jimmy G. Cheek said he has approved more initiatives. One of these is the hiring of six more people in Title IX compliance positions.
"Like many institutions we are not perfect, but our goal is to continue to be the best we can be at creating awareness, educating and preventing discrimination and abuse in any form, and to continue to be equally prepared when it does happen and to deal with it promptly, sensitively, fairly and effectively," he said. "We've come a long way in recent years, and we are working every day to be even better."
The university said in the settlement agreement it does not admit guilt, negligence or that laws were broken.
The lawsuit had claimed the university's administrative hearing process was one-sided and "denies victims the rights to a hearing and to the same equal procedural, hearing, and process rights as given to perpetrators of rape and sexual assault." It also accused the university of providing lawyers for students accused of misconduct and interfering with investigations.
Bill Ramsey, a lawyer for the university, said in February that Tennessee officials "acted lawfully and in good faith" in responding to the incidents mentioned in the complaint.
On Tuesday he and his partner Aubrey Harwell said: "Now, the university can continue its aggressive efforts to deal with Title IX issues, and the plaintiffs can go about their lives without the public agony of protracted litigation and trial."
The lawsuit was filed in federal court in Nashville on February 24. The university said settlement talks began before the suit was filed and became more intense in April.
Title IX regulations bar sexual discrimination at universities that receive federal funds.
CNN's policy is not to name victims of sexual assault or rape.