The Times has apologised after incorrectly suggesting an organisation supported a man who killed three men in a knife rampage in a Reading park.
The newspaper will pay damages to advocacy group Cage and its outreach director Moazzam Begg after suggesting they excused Khairi Sadallah's actions.
Sadallah has admitted three counts of murder but denies the stabbings in Forbury Gardens were terror-related.
Cage said it was awarded £30,000 in damages by The Times.
The apology centres over a June story in response to Cage and Mr Begg, a former Guantanamo Bay detainee, commenting on police and media reaction to the attack.
The Times said it incorrectly accused them of excusing Sadallah's actions by reference to failings by the police and others.
The News UK-owned newspaper also said it wrongly stated Cage and Mr Begg had refused to comment on their involvement with the suspect, despite them having no involvement with Sadallah.
"We apologise to Cage and Mr Begg for these errors and the distress caused, and we have agreed to pay them damages and legal costs," The Times said in a retraction posted online and in print.
Cage said it would use the damages to "expose state-sponsored Islamophobia and those complicit with it in the press".
Mr Begg said in a statement: "Over the years, Muslims in Britain have become accustomed to reading sensationalist and defamatory headlines in popular newspapers.
"We can only hope that this settlement serves as a reminder to others that the truth is not negotiable."
Zillur Rahman, from Rahman Lowe Solicitors which represented Cage and Mr Begg, said he was "delighted" by the "substantial sum of damages" over the article.
"It exemplifies the gravity of the allegations and provides the vindication to which Cage and Mr Begg are entitled," he said.
News UK has been contacted for comment.