The 12 plaintiffs suffered injuries including bruising from less-lethal munitions, lingering respiratory issues from tear gas and psychological trauma, the American Civil Liberties Union [ACLU}said.
Along with the cash settlement, Minneapolis will also implement reforms in the way police officers handle demonstrations, prohibiting them from using physical force and from deploying chemical agents against peaceful protesters.
The settlement requires body cameras worn by Minneapolis police to be recording and unobstructed when they engage with protesters, court records showed.
"This agreement is a big step towards keeping peaceful protesters safe from police violence. I hope other police departments across the country see this outcome and proactively adopt these same policies and standards," Jordan Meyer, one of the plaintiffs in the case, said in a statement released by the Minnesota chapter of the American Civil Liberties Union.
The ACLU helped file the class action lawsuit against the city.
Demonstrations and, at times, violent riots erupted across Minneapolis hours after Officer Derek Chauvin pressed his knee against Floyd's neck for more than nine minutes during an arrest over a counterfeit $20 bill on May 25, 2020. Chauvin was later convicted of murder and pleaded guilty to federal charges.
A video of the incident circulating on social media helped spark demonstrations against police brutality and racism across the nation and in large cities around the globe.