US president-elect Donald Trump and prosecutors reached a US$25 million settlement in the Trump University fraud case, New York attorney-general Eric Schneiderman said yesterday.

The settlement comes after months of legal battles between the president-elect and prosecutors accusing him of running a university that operated illegally and defrauded more than 6,000 students out of US$40 million.

"Donald Trump fought us every step of the way, filing baseless charges and fruitless appeals and refusing to settle for even modest amounts of compensation for the victims of his phony university," Schneiderman said.

"Today's US$25 million settlement agreement is a stunning reversal by Donald Trump and a major victory for the over 6,000 victims of his fraudulent university."

He noted that every victim will receive restitution and Trump will have to pay up to US$1 million to the state of New York for violating education laws.

The charges included "persistent fraudulent, illegal and deceptive conduct" for running a university that was not accredited and failed to deliver real estate investment techniques to students, some of whom lost thousands of dollars in the process.

The settlement includes two federal class-action lawsuits filed in California and a case brought by Schneiderman in New York in 2013.

Trump had sought to shut down the trials and insisted several times this year that the judge in one of the federal cases, who is of Mexican descent, was biased against him.

In February, Trump tweeted, "Trump University has a 98 (percent) approval rating. I could have settled, but won't out of principle!"

- dpa