Walsh had been wrongly accused of a sexual assault last year and sued the newspaper for aggravated and exemplary damages, over its June 23, 2011 article headlined "Louis Probed Over 'Sex Attack' on Man in Loo".
The X Factor judge was investigated by the police in June 2011 after 24-year-old dancer Leonard Watters claimed that Walsh indecently assaulted him in the toilets of a Dublin nightclub after a Westlife concert.
"I'm very relieved," Walsh said after receiving the damages from News Group Newspapers.
"This has had a terrible effect on me. It was all lies. I'm very satisfied with this total vindication for me, but I remain very angry at the treatment I received at the hands of The Sun."
The Irish Sun has denied defamation, claiming that it acted fairly - but it has accepted that the accusation of sexual assault was false.
Lawyers acting for Walsh had claimed that the newspaper offered Watters money if he agreed to contact the police about the alleged assault.
"The allegations made against me are wholly false and with no foundation," Walsh said at the time.
"I will happily co-operate fully with the police and am 100% confident that after a full investigation I will be fully exonerated."
The case against Walsh was dropped soon after and the 58-year-old pledged to take legal action against the Irish Sun for its reporting of the case.
Streamabout - Louis Walsh on MUZU.TV.
"I remain outraged that this story ran in the first place in The Sun and I have instructed my libel lawyer to vigorously pursue legal action against the paper," he said.
Watters later retracted his allegations, maintaining that while he was sexually assaulted, Walsh was not the perpetrator.
"I would like to sincerely apologise to Mr Louis Walsh for all the stuff I put him through," he said. "The allegation was false."
Watters was later charged for falsely reporting the allegations and jailed for six months for making the untrue claims.
Walsh later said that he considered killing himself after the fabricated allegations emerged.
"It's the first time in my life I've ever considered ending it," he said. "I was serious. I've changed forever. This has made me physically ill.
"I can't eat, I can't sleep. I've lost so much weight that my suits don't even fit me anymore. Even today I'm still a shell of my former self."
Senior counsel for News Group Newspapers Eoin McCullough told Dublin's high court: "The Sun fully accepts that the alleged assault did not occur in the first place and Louis Walsh is entirely innocent of any such assault.
"The Sun unreservedly apologises to Louis Walsh for any distress caused to him as a result of our article."