Apple will pay Nokia a one-time payment and royalties going forward, Nokia said. The company said it is keeping the financial terms of the deal confidential, but the deal will increase operating margins in Nokia's second quarter financial report.
The two companies will also withdraw their complaints to the US International Trade Commission.
Nokia, a global phone maker based in Finland, sued Apple for patent infringement.
"We are very pleased to have Apple join the growing number of Nokia licensees," said Stephen Elop, president and chief executive officer of Nokia, in a statement. "This settlement demonstrates Nokia's industry leading patent portfolio and enables us to focus on further licensing opportunities in the mobile communications market."
Elop is former president of Microsoft's Business division, which makes Office and other software.
Microsoft and Nokia have a partnership to make Windows Phone the primary software on Nokia smartphones, and Elop expects the first phones to hit the market in the fourth quarter of this year.
Nokia's stock has risen 4 percent in intraday trading to $6.39 per share.
(Photo of Stephen Elop: Nokia)