Karen George filed a lawsuit in 2009 claiming the rehearsal studio in the singer's apartment subjected neighbours to 'blaring music, stomping and shaking walls' for up to three hours a day.
The Material Girl star was due to face trial after a judge ruled there was evidence the 53-year-old was a 'noisy neighbour'.
But court records now show the claim was settled as of Wednesday.
Lawyers for Madonna and the building's co-op board would say only that the matter was resolved. Ms George's attorney hasn't been available for comment.
Ms George had filed legal papers two years ago complaining about the 'pounding noise and vibration' caused by Madonna's daily dance sessions in the flat below hers.
She said the singer would blast out music as she rehearsed dance routines in one of three flats she owned in the building called Harperley Hall.
Madonna took steps to sound-proof her flat, but according to Ms George that didn't work and requests to Madonna to turn her music down failed.
She had always maintained that the noise levels never breached legal limits, but claims she has since built a studio elsewhere and no longer uses the apartment for rehearsals.
The lawsuit also accused the building's management of not taking steps to remedy the noise problem, which began after Madonna purchased apartment 7A.
The lawsuit said George was 'forced to leave her apartment on numerous occasions and greatly interfered with the entertainment of guests.'
Ms George, who is in her 40s and has lived in the building since 1995, sought undisclosed damages for the maintenance she has paid since June 2009.
Madonna bought her first flat in the building over 20 years ago when she was married to actor Sean Penn.
She added another flat to turn her home in a 5,000sqft five-bedroom mansion and in 2007 sued the board of management of Harperley Hall after they refused to let expand her home by buying a third apartment.
In April 2008, Madonna bought a seventh-floor flat for $7m.
Last year, Madonna faced similar complaints about noise after officials with Westminster Council in London issued a noise abatement order against her home in Marylebone.
Neighbours complained about loud music from her home on a Sunday afternoon.
Council officials monitored the sound and ruled it to be a 'statutory nuisance'.
The singer was not at home at the time but as the registered owner of the house was issued with the noise abatement order and warned further offences could lead to a £5,000 fine.