Ottawa has agreed to pay $100 million to settle a four-year legal battle with disabled veterans who had launched a class-action lawsuit after some of their financial benefits were clawed back.

The settlement, which must still be approved by the Federal Court, would provide more than 12,000 veterans with payments of between $2,000 and $50,000 depending on when they served and the severity of their disabilities.

It is the latest in what could be a string of such settlements as the Liberals have indicated that they plan to resolve several other class actions brought forward by current and retired military personnel.

"I believe the proposed settlement is fair and provides both sides with needed closure," Veterans Affairs Minister Seamus O'Regan said in a statement announcing the agreement in principle.

"Now that this matter may soon be behind us, the government of Canada will continue working to better serve veterans and their families. I believe this decision shows that we intend to ensure that veterans in Canada are better off now than they were before."

The lawsuit was launched in 2014 after the federal government clawed back financial assistance from thousands of low-income veterans because they were also receiving disability pensions for injuries sustained while in uniform.

Complaints about the Liberals' pension plan

The veterans alleged that the deductions, which took place between April 2006 and May 2012, violated their charter rights by discriminating against them because they were disabled.

A Federal Court hearing is scheduled for December, where the government and lawyers representing the veterans are expected to ask for the settlement to be approved.

The settlement represents the latest win for veterans and military personnel after several previous proposed class-action lawsuits were similarly resolved before reaching trial, most notably an $887-million agreement in 2013 for military pension clawbacks.

Minister of Veterans Affairs Seamus O'Regan says he believes the 'proposed settlement is fair and provides both sides with needed closure.' (Adrian Wyld/Canadian Press)

The Liberals also ordered government lawyers in February to launch settlement talks for three proposed class-action lawsuits filed by former Canadian Forces members who say they experienced harassment and discrimination while in uniform.

Yet the community also suffered a devastating loss last month when the Supreme Court opted not to hear an appeal brought by a group of disabled veterans called the Equitas Society, who were fighting the Liberals to bring back lifelong disability pensions.

Those pensions were abolished in 2006 and replaced by a lump-sum payment and career-training assistance, much to the chagrin of the Equitas members and other veterans, who said it provided significantly less financial compensation than the old system.

The Liberals have promised their own pension plan, which comes into effect next year, but the Equitas members and others have complained that it also falls far short.