Tembo had taken the premier to the civil court demanding damages for a promised marriage that never materialised.
Prominent Harare lawyer Jonathan Samukange who was representing Tembo, confirmed a deal had been reached but could not give details of what was agreed. Samukange, in a notice to court, said Tembo had withdrawn her matter.
Tsvangirai, who had denied he ever married Tembo but had just paid compensation for impregnating her, has since married Elizabeth Macheka.
Tembo and a South African woman, Nosipho Shilubane, in September fought to block Tsvangirai’s wedding to Macheka under a law that allows monogamous marriage, claiming the premier had promised to marry them.
Sources privy to the discussions in the past weeks were saying Karimatsenga had been demanding a once off payment of at least $300,000 for her upkeep which she was claiming Tsvangirai is capable of paying.
Tsvangirai’s lawyer Advocate Thabani Mpofu was not reachable for comment.