DUBLIN, 4 Feb 2015 (AFP) - McIlroy had been suing Conor Ridge's Horizon Sports Management company, who in turn counter-sued the Northern Irishman over the terms of an agreement he struck with the firm in 2011.
After proceedings opened at Dublin's High Court on Tuesday, there were three deferrals as lawyers for both sides held talks.
Negotiating teams stayed late on Tuesday in an attempt to find a solution in a case that threatened to disturb the golfer's preparations for the Masters.
In a brief statement issued in court, the two sides confirmed they had reached an agreement.
"The legal dispute between Rory McIlroy and Horizon Sports Management has been settled to the satisfaction of both parties who wish each other well for the future," the statement said.
"The parties will be making no further comment."
The terms of the settlement were not disclosed but a source close to the case indicated the agreement was worth more than $20 million to Horizon.
McIlroy was not in court on Wednesday but Ridge did attend, although he made no comment to reporters.
The 25-year-old McIlroy's deal with Horizon, renegotiated in 2013, was to last until 2017, with Ridge's company receiving commission on the golfer's financial dealings.
McIlroy took action over over £4.2million (5.6 million euros, $6.3million) in fees to Horizon from his earnings on and off the course.
Horizon had argued they had a contract with McIlroy entitling them to a share of his endorsement earnings until 2017.
McIlroy terminated his contract with Horizon in September 2013, forming his own company to manage his affairs, Rory McIlroy Inc.
He argued the terms of his deal were vastly inferior to those signed by other golfers at Horizon, including fellow countryman and major winner Graeme McDowell.
He claimed Horizon charged almost four times what top ten golfers pay to agents.
McIlroy was with Horizon when he signed a sponsorship deal with equipment manufacturers Nike in early 2013, by itself said to be worth $100 million over five years, and also signed other high-worth deals.
Despite the looming court case, McIlroy won last weekend's Dubai Desert Classic and, if he maintains his form, is set to continue to enjoy a hugely lucrative career on and off the course.
McIlroy just needs to win the Masters to become only the sixth golfer in history, and the first from the British Isles, to win all of golf's four majors -- British Open, US Open, US Masters and US PGA.
If McIlroy, the reigning British Open and US PGA champion, dons the Green Jacket at Augusta National he will join the American quartet of Gene Sarazen, Ben Hogan, Jack Nicklaus and Tiger Woods, and South Africa's Gary Player as the only golfers to have completed a career grand slam.