The case was withdrawn with prejudice, meaning it cannot be brought again, Reuters said. Details of the settlement were not immediately available.
Lohan sued in March, saying that the portrayal of a baby girl named Lindsay breached her privacy.
The ad shows a baby boy apologizing to his girlfriend via video chat for not calling her, saying he was busy using E-Trade. The baby girlfriend asks if "that milkaholic Lindsay" was around at the time.
Another baby girl then walks into the frame, presumably Lindsay, who asks Milk-a-what?"