The settlement by the world's No. 1 maker of breakfast cereal marks the latest such outcome in a recent wave of litigation challenging nutrition claims in food labeling.
Several lawsuits merged into a single case in 2011 accused Kellogg of deceiving consumers by labeling products as "All Natural" when they contained ingredients such as pyridoxine hydrochloride, calcium pantothenate or hexane-processed soy oil.
The settlement must be approved by a federal judge in San Diego overseeing the case before the suit is dismissed. It was submitted in court last week and contained no admission of false or misleading labeling by Kellogg.
In a statement on Thursday, company spokeswoman Kris Charles said Kellogg's Kashi and Bear Naked lines "provide comprehensive information about our foods to enable people to make well-informed choices."
"We stand behind our advertising and labeling practices," she said. "We will comply with the terms of the settlement agreement by the end of the year and will continue to ensure our foods meet our high quality and nutrition standards, while delivering the great taste people expect."
Under the proposed settlement, Kellogg will drop the terms "All Natural" and "Nothing Artificial" from labeling and advertising for Kashi products containing certain ingredients challenged in the litigation.
Similarly, the terms "100% Natural" and "100% Pure and Natural" will be removed from certain Bear Naked products.
Kellogg also agreed to establish a $5 million settlement fund to allow consumers to recoup $0.50 per package for Kashi products purchased during specified periods. A settlement fund of $325,000 will be set up for Bear Naked consumer claims.
Lawyer Livia Kiser with the firm Loeb & Loeb, who specializes in food labeling litigation, said lawsuits like the Kashi and Bear Naked complaints were becoming more prevalent as health-conscious consumers demand greater accuracy in packaging and advertising.
"Kellogg's resolution of this case is part of a trend," she said, adding that a number of companies have altered wording on their products in the face of similar litigation.