An article published in the newspaper “included false and defamatory claims” about her work as a model, the High Court hears.
Melania Trump has accepted damages and an apology over allegations about her work as a professional model.
The action was against Associated Newspapers, publishers of the Daily Mail, after it ran an article headlined “Racy photos and troubling questions about his wife’s past that could derail Trump”.
The amount of damages was not disclosed in court, although Sky News understands the total payment of damages and costs is believed to come to less than $3m (£2.4m).
The article published in the newspaper and on Mail Online last August “included false and defamatory claims” about the First Lady “which questioned the nature of her work as a professional model, and republished allegations that she provided services beyond simply modelling”, the court heard.
The piece referred to rumours that a modelling agency Mrs Trump worked for in Milan was “something of a gentleman’s club” and another in New York “operated as an escort agency for wealthy clients”.
Her lawyer John Kelly said the story included statements that Mrs Trump denied the allegations and that Paulo Zampolli, who ran the modelling agency, also denied the claims.
The article, he said, also said there was no evidence to support the allegations.
Mr Kelly told Mr Justice Nichol: “The article also claimed that Mr and Mrs Trump may have met three years before they actually met, and ‘staged’ their actual meeting as a ‘ruse’.”
He said the allegations about Mrs Trump were not true - and “strike at the heart of the claimant’s personal integrity and dignity”.
Catrin Evans QC, for the publishers, told the judge: “The defendant acknowledges that these claims about the claimant are untrue, and we retract and withdraw them.
“The defendant is here today publicly to set the record straight, and to apologise to the claimant for any distress and embarrassment that the articles may have caused her.”
In its apology, the Daily Mail said it accepts the allegations about Mrs Trump “are not true and we retract and withdraw them”.
It added: “We apologise to Mrs Trump for any distress that our publication caused her”.