"I would like to thank the club and the LMA for ensuring that matters have been brought to a swift and harmonious conclusion," Wilkins said in a statement.
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Former Chelsea captain Wilkins had said he was "undoubtedly" unfairly dismissed and turned to the LMA for legal advice after his sudden departure from the club on Nov. 11.
Chelsea chief executive Ron Gourlay said on the club website: "I am pleased to announce that we have come to a swift and amicable agreement with Ray Wilkins and all unresolved matters have now been settled."
Having begun his career at Chelsea, being made captain at just 18, the 54-year-old returned to the club's coaching staff in 2008 and helped Italian manager Carlo Ancelotti lead the London club to last season's Premier League and FA Cup double.
"It has obviously been a big wrench leaving such an illustrious club and one which has played such a huge role in my playing and coaching career," added Wilkins who also played for England, AC Milan and Manchester United.
