The settlement, which was approved 13-0, is the largest in Minneapolis police history. About $500,000 will go to the community around the intersection where Floyd died.
"It's not just enough for America to say that George Floyd's life matters. We have to show that George Floyd matters by our actions," Benjamin Crump, an attorney representing Floyd's family members, said during an afternoon press conference.
Crump called Floyd's death a "watershed moment" and applauded the City Council's move.
He added that the record settlement shows "we can reach an agreement about what form justice might take, not wait for it to be determined only by a [historically] discriminatory criminal justice system."
The announcement came in the middle of jury selection for Derek Chauvin, the former police officer charged with second-degree murder and second-degree manslaughter, as well as third-degree murder, in Floyd's death.