Though terms of the settlement have not yet been disclosed, Hurshell Ralls from North Texas in the US had been seeking over $5 million in a civil suit he filed against the two doctors who removed the vital organ without his permission.
The hospital where the surgery was performed was also named in the suit.
Ralls' attorney Steve Briley said his client was having surgery in 1999 to remove a cancerous bladder, which would likely include the removal of his prostate gland.
The attorney said the doctors removed Ralls' penis after they mistakenly thought the cancer had spread to the male sex organ. He said a pathology test indicated that Ralls' penile tissue was not cancerous.
The doctors - John S.Dryden and Farid Khoury - charged with negligence and not seeking prior consent for the amputation, refused to admit to any wrongdoing.
Joel Steed, the attorney for the doctors said Ralls had been informed his penis might have to be removed to treat the cancer he had in his bladder.
Steed said during the surgery, the two doctors saw tissue indicating the cancer spread from the bladder to the urethra, and they felt removing the penis would provide the best chance for patient's survival.
But Ralls and his wife were not convinced.
"Mr Ralls was not informed that he was going to wake up and not have a penis," his attorney insisted.