The 71 former residents of Darwin's Retta Dixon home, who alleged physical and sexual assaults by staff between 1946 and 1980, launched a civil lawsuit in 2015 against a convicted paedophile, the Commonwealth and the religious group that ran the home.
A spokesperson for the Department of the Prime Minister and Cabinet told NITV News they acknowledge the trauma that has resulted from the abuse.
"It is hoped that the settlement of this claim will enable those who suffered to reach a form of closure on this period of their lives."
"Children were chained to beds, raped by Henderson, sexually abused by other children and punished for trying to report the assaults."
The home for Stolen Generation children was run by Australian Indigenous Ministries and overseen by the federal government.
The group's lawyer Bill Piper told the ABC half the plaintiffs alleged sexual abuse and basically all alleged physical abuse in what is believed to be the largest class action in NT history.
The government spokesperson said all defendants contributed to the settlement after a week-long mediation but wouldn't disclose the amount.
They include the AIM and Donald Henderson, who never faced trial over numerous claims of abuse he allegedly perpetrated while a house parent at Retta Dixon.
Henderson worked at Retta Dixon for 11 years and was convicted in 1985 of unrelated child sex abuse offences. He was fined $300 and placed on a good behaviour bond.
In 2015 the royal commission found the church group repeatedly failed to protect the children but didn't rule on whether the government failed in its duty of care.
During the inquiry's hearings in 2014, 10 former residents gave harrowing evidence about sexual, physical and physiological torment they endured.
"One girl was allegedly hit so hard her nose was broken and other children were force-fed until they were sick and then made to eat the vomit."
They testified that children were chained to beds, raped by Henderson, sexually abused by other children and punished for trying to report the assaults.
One girl was allegedly hit so hard her nose was broken and other children were force-fed until they were sick and then made to eat the vomit.
Abuse charges relating to five children were laid against Henderson in 1975, but were dropped by the Department of Public Prosecutions, something which the commissioners found was wrong.
A public apology and counselling was only offered by AIM during those hearings.
At first the organisation said it could not afford financial redress, but then agreed to sell a property worth between $350,000-$380,000 to do so.