The city pledged to fund a $200,000 grant as part of the settlement for public high school students who want to become entrepreneurs.
The two black men who were arrested at a Philadelphia Starbucks last month while waiting to meet with someone settled for a symbolic $1 each and a pledge from city officials of $200,000 for young entrepreneurs.
Starbucks confirmed they have reached an agreement in a statement that did not include the financial details, which were first reported by the Associated Press.
Last month, Rashon Nelson and Donte Robinson were arrested while sitting in the coffee shop waiting for another member of their party to arrive.
The arrests, which led to a backlash against the coffee chain and police, went viral after a customer posted a video of the two men being taken away in handcuffs.
Nelson and Robinson decided not to pursue a lawsuit against the city of Philadelphia, city spokesperson Mike Dunn told Philly.com.
"Instead, they approached the city and agreed to release the city and its employees from any and all claims for a payment of $1 to each of them," Dunn said.
The city agreed to fund an entrepreneurship program for Philadelphia public high school students interested in becoming entrepreneurs.
As part of the deal, Robinson's and Nelson's records will be expunged.
"We thought long and hard about it and we feel like this is the best way to see that change that we want to see," Robinson told the AP. "It's not a right-now thing that's good for right now, but I feel like we will see the true change over time."
CEO Kevin Johnson vowed that Starbucks would "learn" from the incident. Last month the coffee shop announced it will close more than 8,000 stores and corporate offices in the US one afternoon in May to hold anti-racial bias training.
"Starbucks will continue to take actions that stem from this incident to repair and reaffirm our values and vision for the kind of company we want to be," Johnson said in a statement Wednesday.
Dunn and the men's lawyer did not immediately respond to BuzzFeed News' request for comment.