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Sitting a few feet away from each other as he spoke, the former lovers tried hard not catch each other's eyes. Mel, who appeared nervous, will be hoping this ruling draws a line under one of the most turbulent periods of his life.
The payments to 41-year-old Oksana, a Russian musician, are dependent on a lasting truce.
As part of the agreement, Lucia, who turns two in October, receive support equal to what the actor-director provides for his other seven children with his ex-wife Robyn. Custody will be shared between Mel and Oksana.
In addition, 55-year-old Mel will keep paying for a multi-million dollar house he purchased for his former girlfriend and their daughter.
The house will be sold when Lucia turns 18 and she will receive the proceeds.
As a result of the settlement, his ex cannot pursue a civil case against the Oscar winner, and both sides were ordered not to speak or write about their relationship or allegations of domestic abuse.
The judge specifically said neither side could release any audio recordings – an apparent reference to a series of explosive arguments that were taped and leaked to the celebrity website RadarOnline.com.
Hollywood was rocked by the recordings, in which the Braveheart star was heard using racist and sexist language towards the mother of his child.