The Consumer Product Safety Commission had charged RC2 Corp. of Illinois and subsidiary Learning Curb Brands Inc., knowingly imported and sold Thomas & Friends Wooden Railway toys that had "paints or other surface coatings" containing lead levels above .06 percent by weight from China.
In agreeing to pay the settlement, the company denies it intentionally violated federal law.
In 2007, RC2 reported that more than two dozen styles of vehicles, buildings and other train set components were found to contain lead levels that violated the 1978 ban.
The government says that prompted a recall beginning June 2007, which got the attention of Congress.
Last year, lawmakers passed the Consumer Product Safety Improvement Act, which lowered the legal lead levels of toys.