The city of Minneapolis will pay a record $US20 million to the family of Australian woman Justine Damond Ruszczyk, who was fatally shot by a police officer when she approached his squad car after calling 911 to report a possible crime.

Key points: Justine Damond Ruszczyk was fatally shot after she called police to report a possible sexual assault in the alley behind her house

Justine Damond Ruszczyk was fatally shot after she called police to report a possible sexual assault in the alley behind her house Former police officer Mohamed Noor was found guilty of murder and manslaughter in April

Former police officer Mohamed Noor was found guilty of murder and manslaughter in April The mayor of city of Minneapolis said the payout will help the city "move forward"

Mayor Jacob Frey and city council members detailed the settlement just three days after a jury convicted Mohamed Noor of murder and manslaughter in the 2017 death of Damond Ruszczyk, who was unarmed.

The dual Australian-US citizen had called 911 to summon officers in the middle of the night to a possible rape in the alley behind her house.

Noor and his partner were driving down the alley in a police SUV when they say they were startled by a loud noise impacting the vehicle.

Noor testified that he fired to protect them from a perceived threat. Jurors took almost 12 hours to reach a verdict after hearing three weeks of testimony.

Mohamed Noor (L), who had trained to become a police officer in a mid-career switch, was fired after he was charged. ( AP: Star Tribune/David Joles )

Damond Ruszczyk's family had filed a lawsuit seeking more than $50 million, alleging that her civil rights were violated.

An attorney for the family says the family agreed to settle a lawsuit against the city only because the amount was "transformational".

Bob Bennett says the $20 million settlement the city will pay to the Damond Ruszczyk family "serves as a marker for future transgressions".

Mr Frey said the city moved quickly to settle in part due to Noor's conviction for third-degree murder, as well as the officer's failure to identify a threat before he used force.

"This is not a victory for anyone, but rather a way for our city to move forward," he said.

The settlement — believed to be the largest stemming from police violence in the state of Minnesota, and roughly four to five times as large as any settlement paid out in recent years — calls for Damond Ruszczyk's family to donate $2 million to a local foundation's fund aimed at addressing gun violence.

The death of Damond Ruszczyk, 40, came a month before she was due to marry.

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 1 minute 22 seconds 1 m 22 s Justine's family reacts to Noor's sentencing.

Noor, 33, who had trained to become a police officer in a mid-career switch, was fired after he was charged.

He remains in custody awaiting sentencing in June, when he faces up to 15 years in prison.

Prosecutors criticised Noor for shooting without seeing a weapon or Damond Ruszczyk's hands. They also questioned whether the loud noise really happened.

Neither Noor nor his partner, Matthew Harrity, mentioned it to investigators at the scene, with Mr Harrity first mentioning it three days later in an interview with state investigators.

Noor refused to talk to investigators.

Reuters/AP