Coca-Cola, while still denying the allegation, said it changed formulas in its Vault Zero and Fanta Pineapple drinks last September to minimise benzene formation, the settlement document says.
The move means Coca-Cola joins several other soft drinks makers who have reformulated products to avoid benzene litigation.
PepsiCo, Coca-Cola's arch-rival, still has action pending against it .
Benzene is a known carcinogen and concerns over its presence in drinks went public last year, following an investigation by BeverageDaily.com and US lawyer Ross Getman.
It confirmed that widely used preservative sodium benzoate may break down to form benzene in drinks also containing either ascorbic acid (vitamin C) or citric acid.
America's soft drinks industry and food safety officials had known this for 15 years, internal memos show, although levels found were not considered a risk to consumers' health.
Coca-Cola has agreed that it will no longer sell Vault Zero or Fanta Pineapple with both sodium benzoate and ascorbic acid.
And to inform consumers, the firm said it would ensure anyone performing a Google search for 'benzene', together with either of the products, would be directed to a special message on the Coca-Cola website.
News of Coca-Cola's reformulation is likely to spark more questions as to why the combination of ingredients was still being used in drinks.
America's Food and Drug Administration (FDA) stuck a private deal for the soft drinks industry to "get the word out and reformulate" , according to Greg Diachenko, an FDA chemist present at meetings with soft drinks firms in late 1990 and early 1991.
Yet independent testing, as well as probes by the FDA and food safety officials in the UK, last year again found benzene in some drinks.
Levels were again not thought to endanger public health, but reformulation was required.
An ex-FDA enforcement official suggested the agency may have fallen short.
"Big companies are very powerful.
If you're a regulator with a tight budget, it could have been one of those closets with skeletons in that you don't want to open," he said on condition of anonymity.
Soft drinks industry leaders also admitted to BeverageDaily.com that the message on benzene may have been lost in places since the issue emerged in 1990.
But they also argued sodium benzoate's ability to kill bacteria both cheaply and effectively outweighed negligible risks over benzene.
An industry-wide guidance document detailing ways to limit benzene in drinks was published by the International Council of Beverages Associations after the issue went public last year.