Britain’s most senior Asian policeman has agreed to a six-figure out-of-court settlement after accusing Sir Ian Blair of being a racist.

Assistant Commissioner Tarique Ghaffur has agreed to halt employment tribunal proceedings and drop claims that the outgoing Metropolitan Police Commissioner acted in a racist or discriminatory way towards him.

It is believed that Mr Ghaffur will receive a payoff of about £300,000 and his full pension after 34 years in policing. The Metropolitan Police Authority has also agreed to a contribution to his legal costs after weeks of bitter wrangling between the two sides.

Sir Ian’s final day in the office is on Friday. He is retiring at 55 with a £300,000 settlement to cover the remainder of his contract as commissioner, which ran to 2010, and will be entitled to a pension of £168,000 per year, meaning that the two deals have cost an initial £600,000 plus hundreds of thousands more in pension payments.

Mr Ghaffur, 53, has signed a gagging clause and will step down from his role at the Metropolitan Police tomorrow after he was effectively suspended in

September when he announced that he was suing his employer for racial discrimination.

In a press conference in August he claimed that he had been sidelined, discriminated against and humiliated in his role as head of security planning for the 2012 Olympics. He blamed Sir Ian and claimed to have compiled a damning dossier of evidence dating back several years.

The allegations grew into the biggest police race row since the Macpherson report, published after the murder of the black teenager Stephen Lawrence.

The Times revealed that the latest row led to a boycott of ethnic minority recruitment by the Metropolitan Black Police Association.

Jacqui Smith, the Home Secretary, announced an assessment of how ethnic minority officers are treated in police forces throughout England and Wales.

Boris Johnson, the Mayor of London, also began an inquiry into alleged racism within the Metropolitan Police.

Sir Ian vehemently denies being a racist and did not want his term to end with the allegation against him. Lawyers for both sides have been working together for some weeks to make sure that the matter was settled before he left the force. Met officials wanted to “wipe the slate clean” before Monday, when Deputy Commissioner Sir Paul Stephenson takes the helm as acting chief.

A statement was issued yesterday on behalf of Mr Ghaffur, Sir Ian and Deputy Assistant Commissioner Richard Bryan, the MPA and the Metropolitan Police Service. It said: “The MPA has paid a sum of money in settlement of AC Ghaffur’s claims, including contractual obligations, and a contribution to his legal costs.

“AC Ghaffur has withdrawn the proceedings and his claims that Sir Ian Blair and DAC Bryan acted in a racist or other discriminatory way towards him. The MPA and the commissioner wish to acknowledge the important service of AC Ghaffur in the Metropolitan Police and his significant contribution to operational policing nationally during his 34-year career. They recognise the hurt which he has felt over the past 18 months.”

A friend of Mr Ghaffur said that he was considering setting up a foundation to support vulnerable people, including ethnic minorities, abused women and the poor. He said: “It will give people leadership and direction.”

Times Recommends

• Donor organ allowed child’s own heart to heal
• Michael Jackson: Not the final chapter
• Brüno toned down for 15 rating