The German supreme court confirmed the compensation on Wednesday, according to a report in the Metro daily.
The case stems from several articles published in papers belonging to the Klambt publishing house, including titles such as “Frau mit Herz” and “Welt der Frau”.
The stories included a wide range of false information and claims about Princess Madeleine's life and living habits, including details that she was pregnant and planning to marry.
The stories were published between 2000 and 2004 and the suit was first filed by the royal family's star German attorney Matthias Prinz.
The Swedish royal family has indicated earlier that the money will be donated to charity.
Princess Madeleine, who is third in line to the throne and the youngest child of King Carl XVI Gustaf and Queen Silvia, has endured a tough period in her private life over the past year.
The Royal Court had announced in August 2009 that Madeleine, then 27, was to marry the then 30-year-old Jonas Bergström, a Stockholm lawyer she had been dating for seven years.
But in a short statement in April 2010, the Royal Court said the couple had "gone separate ways" after intense media coverage of the allegedly troubled relationship, including claims from a Norwegian woman that she had an affair with Bergström.
After some time off, Madeleine returned to work in June, and in November spoke of the "heartache" that the break up had caused.
The princess now spends most of her time in New York working for the World Childhood Foundation, a grant-giving organisation set up by her mother in 1999.