Last year, the retailer filed a multi-billion dollar lawsuit against MasterCard claiming that the payment company charged it whenever shoppers used debit or credit cards, Bloomberg reported.
Tesco spokesperson said: "These proceedings have now been settled and discontinued on mutually acceptable terms."
MasterCard chief financial officer Martina Hund-Mejean said: "We have been settling with Tesco, which is the largest merchant claimant in this litigation."
Besides Tesco, over 20 other retailers have also filed lawsuits against MasterCard in London over the fees charged for using credit and debit cards.
The European Union also sent a formal complaint to MasterCard for charging ‘artificially high’ card-payment fees.
MasterCard claims that interchange fees make electronic payments easier across the globe by balancing the benefits and costs of the system among its participants.
Additionally, several retailers are challenging $6bn class-action antitrust settlement with Visa, MasterCard and American Express as they believe that opposing lawyers in settlements, launched to resolve claims that merchants were overcharged for using debit or credit cards, have allegedly exchanged confidential information.