During an edition of This Morning aired on November 8, presenter Schofield confronted David Cameron with a list of senior Tories who had been linked on the internet to an alleged paedophile ring.
None of the names were read out on the show, but ITV has apologised to Lord McAlpine after an 'unfortunate camera angle' meant the list was briefly visible to viewers.
In a statement today (November 22), ITV said that it and Schofield had agreed to pay Lord McAlpine £125,000 in damages and costs.
"ITV and Phillip Schofield have now reached agreement with Lord McAlpine to settle his libel claim, made in relation to the This Morning programme broadcast on November 8, 2012," the broadcaster said.
"ITV and Phillip Schofield apologise unreservedly to Lord McAlpine, have agreed the terms of a statement to be made in open court, and have agreed to pay him damages of £125,000 and his legal costs."
[Pictured: David Cameron on This Morning]
Sources had suggested that Lord McAlpine intended to target a significantly higher compensation settlement from ITV than the £185,000 he got recently from the BBC. This was because ITV is a commercial broadcaster, whereas the BBC is funded by the TV licence fee.
Earlier in the month, a BBC Newsnight documentary linked a "senior Conservative politician" to alleged child abuse at a care home in North Wales. It did not name Lord McAlpine, but he was falsely accused later by people on the internet.
Ofcom has launched investigations into the Newsnight broadcast and the edition of This Morning.