The firm will now incur losses on the Olympics contract of about £70m – up from a previous estimate of £50m.
G4S chief Nick Buckles said he was “pleased” to have concluded talks.
He added that “the overall cost to the taxpayer has been reduced significantly against the planned cost”.
The company said that the main difference between this deal and the previous one was an agreement to waive a larger proportion of the project management charge.
G4S came under severe criticism ahead of the Games, when it emerged that it had failed to recruit and train enough of the guards it had promised for the event.
The government was forced to turn to the military to provide extra staff.
G4S also said it had incurred extra costs of about £11m “relating to charitable donations and external fees” and £7m relating to sponsorship and marketing costs.
“Whilst we are extremely disappointed to find ourselves in this position, we are pleased to have concluded these negotiations with Locog,” said Mr Buckles.
“We have accepted responsibility for the security workforce issues and, as a result of the settlement terms which we have announced today, have ensured that the overall cost to the taxpayer has been reduced significantly against the planned cost.”