Compensation will be paid to 19 vulnerable patients who were abused at the Winterbourne View private hospital, near Bristol.
A BBC Panorama investigation in 2011 uncovered patients being abused and neglected by care workers. Six out of 11 staff were jailed.
Castlebeck, which ran the home, went into administration in March.
The terms of the Department of Health payout have been kept confidential and the NHS has not admitted liability.
NHS officials had sent the patients to Winterbourne for treatment.
A Department of Health spokesman said: "The NHS must make sure it is delivering dignified and safe care. The horrific scenes exposed by the BBC at Winterbourne View shocked the whole country. While we do not accept legal liability in these cases it is right we have settled these claims.
"We have made sure action has been taken and former residents of Winterbourne View are now receiving safe, dignified care.
"NHS England and the Local Government Association are working with local areas to transform health and care services for people with learning disabilities and we expect to see a big improvement."
Solicitor Andrew Hannam, who represents one of the families, said the sums involved "won't be life-changing" but will "enable luxuries to be bought".
He said those being compensated would "be able to have a bit of fun and perhaps try and balance out what they suffered at Winterbourne View".
Last year, 11 care workers admitted a total of 38 charges after they were secretly filmed abusing patients at the home, which looked after people with severe learning difficulties.
Six were jailed, the remainder received suspended sentences.
After the scandal was exposed, the Department of Health awarded the charity Respond a £25,000 contract to provide family support groups and psychotherapy for the Winterbourne victims.