Boxun News retracted its "negative and untrue" reports that began in May 2012 in an apology displayed on its English-language site on Wednesday.
"These false reports about Zhang Ziyi should never have been published. As a result, Boxun News now renders its unreserved apology to Zhang Ziyi, has removed the entire series of articles about Zhang Ziyi from the Boxun News website, and issues this formal retraction," said Boxun, whose reports regularly allege human rights violations and political scandals and which is blocked in China.
Zhang brought the lawsuit in a Los Angeles court against China Free Press, Inc.—a North Carolina non-profit corporation devoted to promoting free speech and democracy in China—doing business as Boxun News, and Weican Null Meng, a U.S. citizen and founder of China Free Press. Zhang claimed damage to her reputation and business interests, according to court documents.
Zhang complained that Boxun News had repeatedly published untrue reports that she was a prostitute who earned more than $100 million by having sexual relations with Chinese government officials and others, according to court documents. Those articles were then republished by other media outlets around the world.
Zhang also disputed Boxun's allegation that she was working on behalf of the Chinese government to damage the website's reputation.
Boxun's reports caused a stir in China because one of the officials they alleged she has slept with was Bo Xilai, a former prominent politician imprisoned for corruption and abuse of power, whose downfall was well under way at the time.
The 34-year-old actress said Boxun had never contacted her before publication to confirm its report or obtain comment. Court documents said she had suffered approximately $250,000 in specific damages, in addition to general damages for injury to her reputation, and that she also sought punitive damages.
The defendants initially argued their reports were protected by the First Amendment of the U.S. Constitution that covers free speech.
Meng had said the case was "an effort by the Chinese government (albeit by proxy) to attach and retaliate against an independent journalistic critic of its brutal and repressive practices, and to use the American judicial system as an instrument to identify dissidents for persecution," according to a defendants' summary.
It said Meng could not reveal his sources as it would expose them to arrest and imprisonment and even torture in China.
However, in its apology, Boxun said that its Zhang articles were based on information provided by anonymous sources, "who cannot support the information reported."
A court document filed Tuesday said the case had been settled.
Meng said Wednesday he was not allowed to speak to the media about the case.
Zhang's U.S.-based publicist did not immediately respond to a request for comment.
After catapulting to stardom with the Oscar-nominated "Crouching Tiger," Zhang's subsequent English credits include "Rush Hour 2," "Memoirs of a Geisha" and "Horsemen."
She won best actress at Taiwan's Golden Horse awards last month for the acclaimed martial-arts epic "The Grandmaster."