The award settles a wrongful conviction lawsuit filed by Michael Clancy.
Clancy, an elevator repairman, was arrested in March 1997 in the killing of John Buono in the Bronx.
He was sentenced to 25 years to life in prison.
He was released in 2008 after an informant told authorities he was present when another man killed Buono. A second informant later confirmed Clancy's innocence.
Clancy's attorney, Ronald Kuby, told The New York Times that the settlement was the fourth largest in a wrongful conviction case in New York State.
Clancy says he plans to buy his parents a house with the money.