An agreement calls for attorneys representing former Bier to be paid $380,000. Manson's insurance company will pay $175,000 while the rest will be paid by Bier's former business managers, Manson's attorney Howard King said.
Bier sued the shock rocker for $20 million in 2007, claiming the singer kept money from him and spent it to furnish a lavish lifestyle buying Nazi memorabilia, an engagement ring and other exotic goods.
Manson denied Bier's claims and said Bier didn't properly perform his duties as a band member.
Bier, who went by the stage name Madonna Wayne Gacy, was among the original members of Manson's band when it was known as Marilyn Manson and The Spooky Kids.
The case had been scheduled to go to trial this month after frequent delays and months of fighting between the two sides over depositions, documents and scheduling.
King declared victory, saying Manson will not have to pay any money directly. He said the case should have never been filed.
A dispute over how the $380,000 settlement should be divided has kept the case from being formally dismissed. A law firm that Bier also sued is seeking more than $70,000 from the settlement for legal fees it was awarded after having portions of the case dismissed and the ruling upheld on appeal.
Bier's attorney, Keith A. Fink, said the settlement also calls for some of his client's equipment to be returned.
Manson recently finished a European tour.