Former NSW deputy premier Andrew Stoner has dropped his defamation case against broadcaster Alan Jones and Greens MP Jeremy Buckingham, in a surprise move that could leave him thousands of dollars out of pocket.

Lawyers for Mr Stoner told the Supreme Court on Thursday that the parties had settled the dispute. Justice Lucy McCallum ordered that the case be dismissed.

Jones, the top-rating 2GB breakfast radio host, told Fairfax Media the settlement was a "major victory for Jeremy Buckingham and me".

"There's been no money changed hands, no apologies, no nothing," he said. "It couldn't be a more humiliating defeat for Andrew Stoner."