A US punk band of the same name had sued the former X Factor finalists for $1 million (£630,000) in damages plus royalties.
Simon Cowell's company Syco filed a counter-claim against the group but the matter has now been resolved amicably.
"All of the parties involved are pleased with the resolution and wish each other success," a joint statement read.
The US group confirmed on Facebook: "The California band formerly known as One Direction, whose albums are titled The Light and Uncharted Shores, will now be known as Uncharted Shores."
When a fan of the US group said that they deserved to keep their original name, they responded on Twitter: "Well it was time to move on and break new ground!"
Listen to 'Uncharted Shores' by the band formerly known as One Direction below: