Woody Allen's spokeswoman says American Apparel has agreed to settle his lawsuit for $5 million.
Allen appeared Monday at a Manhattan courthouse, where he had sued the Los Angeles-based clothing manufacturer over its advertising.
The actor-director sued American Apparel Inc. last year for $10 million.
He claimed the company did not have permission to use a doctored frame of him from the Oscar-winning film "Annie Hall" on billboards and on a Web site.
American Apparel called it a First Amendment issue.
Jury selection had been scheduled for Monday.