The deal ends a bitter, three-year legal battle which had initially aimed to secure compensation for thousands of asylum seekers.

The Iranian girl, referred to as "AS", was held in detention on Christmas Island for almost a year, after arriving in Australia with her parents by boat in 2013.

A class action was launched on her behalf in 2014 against then-immigration minister Scott Morrison and the Commonwealth.

The girl's lawyers argued that she developed post-traumatic stress disorder, a dental infection, a stammer and separation anxiety in detention, and still needs ongoing medical treatment.

Lawyers reached a compromise before the trial, which involves the government paying compensation to AS in exchange for her dropping her legal claim.

Supreme Court Justice Jack Forrest approved the confidential deal on Wednesday.

The deal comes after Justice Forrest last month halted the class action, ruling that other asylum seekers could no longer jointly sue the Commonwealth with AS.

The judge said that their personal injury claims were too different from hers and each other's to be dealt with as a group.

This left AS alone in her claim against the government. She and her family have been living in the community on a temporary bridging visa since January 2015.

Outside court, Sister Brigid Arthur, the litigation guardian for AS, said that the girl and her family were relieved to put the case behind them.

"In one way while it's an effort to get justice, it's also an extra trauma for them, and an extra thing they were waiting for a response to," said Sister Arthur, who is co-ordinator for the Brigidine Asylum Seekers Project.

While 35,000 asylum seekers were detained on the island between 2011 and 2014, it is unknown how many had signed on to the class action.

Tom Ballantyne, a principal of Maurice Blackburn, which represented AS, said outside court that while the deal was in her best interests, no amount of compensation could properly recognise what she and other asylum seekers had been through on Christmas Island.

Mr Ballantyne rejected the notion that the class action failed, saying Justice Forrest's decision did not affect other Christmas Island asylum seekers' legal rights to claim compensation separately.

"It in no way judged the actual conditions on Christmas Island," Mr Ballantyne said.

"There are thousands of people who have been deeply affected by their experiences [in detention] and we encourage them to seek legal advice if they want to."

The judge will make formal orders in the coming days, and the question of legal costs will be discussed in court next week.

A spokesperson for the Department of Immigration and Border Protection said the minister and the Commonwealth had made no admission of liability in relation to the matter.

"As this matter is still before the Court in relation to some outstanding issues, it would not be appropriate for the Department to comment further."