Awarded to 447 claimants, the $30 million settlement includes interest, applicants’ legal costs, and administrative costs, and the delivery of an apology.
Lawyers say individual payments will range between $5000 to $80,000, and will be administered over the next 6-12 months.
"Justice has served itself - not initially, but now it has, and we just need to accept and move forward," Palm Island Aboriginal Council Mayor Alf Lacey told NITV News.
"It’s been a cloud over the community for quite some time.
"The court’s decided let’s move on and look forward to a better future for Palm, otherwise we’ll continue to hold onto the past a lot and I don’t think that does us well."
State Minister for Aboriginal and Torres Strait Islander Partnerships, Jackie Trad, said the government would work with the community on a "fitting way" to deliver the historic apology.
"I know that for many Palm Islanders this was an incredibly difficult time in their history," Ms Trad said in a statement.
"I look forward to continuing to work closely with the community as we move forward together."
The class action stemmed from the aftermath of the death in custody of Mulrunji Doomadgee in 2004. Palm Island man Lex Wotton was convicted of inciting the riots that followed the death, but Mr Wotton launched legal action on behalf of the community in 2014 accusing the Queensland government and police of being racist in their response to the incident.
In December 2016, Mr Wotton was awarded $220,000 in damages in a scathing judgement which ruled that police had violated the Racial Discrimination Act, preferring "confrontation to engagement" and operating with an “us and them” attitude. The ruling opened the door for compensation for a further 447 Palm Islanders who claim they, too, were discriminated against in the aftermath of Mulrunji's death.
The latest settlement is the result of three days of court-ordered mediation between the State Government, Queensland Police and the Palm Island community.
Stewart Levitt, senior partner of law firm Levitt Robinson which led the class action, says such a large settlement in these circumstances is "unprecedented in international law".
"We were able to channel people’s rage and anger [to achieve] justice and equity through legal processes, which is something that many Indigenous people feel has been denied to them for too long," Mr Levitt told NITV News.
"There should be more of it."
Levitt Robinson will hold two public meetings in Townsville and Palm Island next week to inform residents of their entitlements.
The federal court will sit in Townsville in June to decide whether to approve the settlement.