The commercial featured a similar-looking reality star Melissa Molinaro and appeared to spoof Kardashian's lifestyle, The Hollywood Reporter says.
Mediator Daniel Weinstein had been engaged by both sides and helped Kardashian and Old Navy's parent company The Gap reach a resolution.
The commercial has been removed from official channels, though can still be found on personal YouTube channels.
Kardashian launched a lawsuit after Old Navy tweeted her about the campaign and was said to be "protecting her brand" with the legal action.
Old Navy's parent company The Gap was said to have launched an investigation into whether or not Kardashian's reputation had been damaged.
It also reportedly wanted to find out about why Kardashian's clothing line had been dropped by retailer Bebe.
Watch the Old Navy advert starring Melissa Molinaro below: