Parents who unwittingly allowed their children to rack up huge bills while playing on mobile apps are to be offered full refunds.
Apple will hand back more than $32.5m (£19.9m) to tens of thousands of Americans who complained their children made in-app purchases without them knowing.
The add-ons for virtual items, extra features and additional levels typically cost between $1 (61p) and $99 (£61).
One woman said her daughter spent $2,600 (£1,591) on a virtual hotel for cartoon dogs and cats, while others spent $500 (£306) keeping their "pet" dragons happy.
The US Federal Trade Commission (FTC), which brought the complaint against Apple, said the company failed to tell parents they were approving in-app purchases simply by entering their password.
Children could then make unlimited purchases for up to 15 minutes without their parents' approval, it said.
Edith Ramirez, chairman of the FTC, said: "This settlement is a victory for consumers harmed by Apple's unfair billing and a signal to the business community.
"Whether you're doing business in the mobile arena or the mall down the street, fundamental consumer protections apply.
"You cannot charge consumers for purchases they did not authorise."
Under the terms of its settlement with the FTC, Apple must provide refunds to parents whose children made accidental or unauthorised purchases.
It will also have to ask users for their consent before billing them for all future in-app purchases and allow people to withdraw their permission at any time.
The changes must be implemented before March 31.
A spokesman for Apple, whose customers spent more than $10bn (£6.1bn) in its App Store last year, said "protecting children" had been its "top priority" since the launch of the App Store.
The company had already offered 37,000 refunds after sending emails to 28 million customers who may have been affected.
In a message to staff, its CEO, Tim Cook, said: "It doesn't feel right for the FTC to sue over a case that had already been settled. To us, it smacked of double jeopardy.
